ECONOMIC AFFAIRS

HC Deb 09 November 1978 vol 957 cc1211-338

Mr. Speaker

I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition.

4.25 p.m.

Sir Geoffrey Howe (Surrey, East)

I beg to move, at the end of the Question, to add: But humbly regret that the policies set out in the Gracious Speech are totally inadequate to deal with the serious economic problems of the country, and that Your Majesty's Government have denied the British people the opportunity to elect a new administration capable of creating a lasting prosperity in which all can share. When this amendment was drafted, my right hon. Friends and I referred to the serious economic problems of the country", but we did not know, of course, of the new dimension that was to be added to those problems by the announcement made today that the minimum lending rate has been raised to 12½ per cent. We look forward to hearing what the Chancellor of the Exchequer has to say about that important matter.

The House has not had the privilege of hearing from the Chancellor for quite some time. Some other audiences have had that privilege. In the Mansion House on 19th October, he told that distinguished audience of The sustained improvement…in our economic performance which, he said had arisen because he had created the fiscal and monetary conditions for faster growth in the real economy. At the Labour Party conference, which some Labour Members may have had the privilege of attending, the Chancellor was not even as modest as that. In his speech from the floor to the conference, he spoke as follows—and the House may be a little surprised by this: The fact is that whoever wins the next election is going to inherit the best balanced economy, the best economic prospects, of any country since the war. To both audiences he unloaded masses of statistics to justify those extravagant claims. It is no wonder that he added, in his speech at the Mansion House, a sentence that sits in his mouth better than in most others: One must never take statistics entirely at their face value". The Chancellor should know better than most other people about that.

The House will look forward to hearing how those triumphant claims at the conference and the Mansion House are to be reconciled with the fact that today we hear that minimum lending rate has been raised to a higher level than at any time in this Parliament except for the three months following the Chancellor's triumphant appearance at the Labour Party conference in 1976, when he decided to go there instead of to the International Monetary Fund.

How are the economic prospects of the construction industry to be improved by a minimum lending rate at this level? How are the prospects of industrial investment on Merseyside, in Wales, in Scotland or anywhere else to be improved by it? How are the prospects for employment on Merseyside, in Wales, Scotland, Wales or Northern Ireland to he improved by a minimum lending rate at this level?

The truth is that the consumer pseudo-boom that the Chancellor so carefully designed for the election that never was has now been killed stone dead. The Prime Minister decided in September that he would not take advantage of the boat that had been designed for him by the Chancellor. He decided to miss it because he did not trust it. How right the Prime Minister was. The boat will not come in again.

The reality of the boom was always transparently clear and transparently "phoney". The Chancellor is fond of quoting sometimes from Mr. Samuel Brittan, the well-known contributor to the Financial Times. On occasions they compliment each other.

On 23rd September Mr. Sam Brittan wrote about the subject "Why the Economy is Booming". He described the dramatic apparent growth in the economic statistics at that time. He included this comment: even Mr. Healey thought my growth estimates exaggerated.…The optimistic features I have been discussing relate entirely to short-term variations of a business cycle stop-go kind. Any politician who cites them should be immediately reminded that underlying performance continues to deteriorate. Despite the present boom total output this year is unlikely to be more than 4 per cent. above the previous peak of 1973 even on the new re-based index. Without North Sea oil the rise would have been 2 per cent.—or less than½per cent. per annum. That is the reality on which the Chancellor has been seeking to present this picture of euphoria and boom.

If one looks at the record of this Government over the whole of their period in office, one sees that the figures are as dismal as they possibly can be. If one looks at the trade weighted value of the pound, it is almost as low as at any time—it has lost a quarter of its value. A couple of years ago, the Chancellor was looking forward to the balance of payments being in credit to the tune of 2 billion or £3 billion. That was what he told the International Monetary Fund in 1976. He will be lucky if the balance of payments shows any surplus at all in the current year.

Production and living standards have barely crept back to the level of the three-day-week and are far behind those achieved in every other Western country without North Sea oil. Ten years ago, steel imports were 2 million tons a year. Today, with massive unemployment throughout the British steel industry, imports are 4 million tons a year. Five years ago, one-quarter of the cars supplied to this country came from abroad. Now 50 per cent. of our cars are supplied from abroad. Last year, manufactured goods made up three-fifths of our total imports. In every sense, the boom has indeed collapsed—the boom that never was. There are even more visible signs than this.

The Government—the House may scarcely remember it now—were elected on a programme of tranquility, prosperity, social peace and harmony, which was then described to the electorate as the social contract. Yet today we live in a society in which Parliament is to be required to discuss Bills which are not even available to the public who are to be affected by them. We live in a society in which prisoners are being denied the right to be brought to trial; where the Government are introducing legislation to set aside the right of habeas corpus; where patients or seriously ill people are being denied the right to treatment.

Is that the kind of society that the social contract was meant to introduce—a society in which standards in every sense, let alone standards of living and standards of wealth, have been allowed to collapse with scarcely a voice of protest at any of those things being raised by the members of the Government who are responsible for this state of affairs?

The acid test of the prosperity of this magnificent society over which the Government preside can be seen in the subject we shall be debating fully in a week or two's time—the attitude of the Government to the European monetary system. Only a moment or so ago the Prime Minister was saying "We know where we are going." Is it not time that he told us where they are going on that point?

However, the reality for the Government is that there is only one question to be decided about the response to that system. Because of the weakness of the economy over which they have presided, the only question is whether the economy will suffer more through that weakness by being left outside than it will suffer through that weakness by joining the system. Why else should they be so anxious to deny the House and the country the facts that we ought to have to decide this question?

The reality of our problems still remains very serious. Inflation and production, of course, have to be taken together. Inflation, of course, is of fundamental importance, but it is one half of the problems that face us. When one considers inflation, as the Prime Minister has invited us to do, one has to look both at the implications of monetary policy and at the attitudes that this House or society ought to have towards pay and pay bargaining. Monetary policy is essential. It is essential, too, that it should be properly understood. Its necessary effect, if it is to work properly, on expectations and on the habits and behaviour of people in the community should be properly explained.

One of the issues that worries the Opposition most about the presentation by the Government is why they spend half their time not explaining their monetary policy and the effect that it is intended to have but misrepresenting it as though it were some form of vulgar abuse by suggesting that monetary policy is likely to do huge damage and is something to be touched only with the utmost care. Of course, if monetary policy was the only aspect of the economic policy that we need, and if it was to be applied in a sudden shock halt, the consequences would be intolerable. But no one is suggesting that it should be used in that way.

The Chancellor understands perfectly well—this is what we have been arguing for a long time—that monetary growth should be reduced gradually, steadily and inexorably so that it takes effect in the way that it should. Why do the Government misrepresent it? Why does the Prime Minister tend so often to brandish it as a kind of alternative punishment—if people do not behave, then we shall have to use this dreadful weapon? Although it may not be much understood by their colleagues, it is their policy, and it seems to me to be extremely foolish to destroy the effectiveness and credibility of it in that way.

It is equally essential for the policy to be properly applied. The Chancellor will remember what he said on 14th June on this matter. He quoted from the Financial Times: the market expects that the first of what is usually a long series of cuts in the lending rate can be expected in a matter of days or, at most, a few weeks". The Chancellor added: I believe that to be true."—[Official Report, 14th June 1978; Vol. 951, c. 1030–31.] At that time the lending rate was 10 per cent. We waited month after month for the Chancellor's forecast to be fulfilled like the weeks that were meant to follow the imposition of sanctions in Rhodesia. The reduction in the MLR never happened. Today it is up to 12½ per cent.

We look forward to hearing—as we have already heard from the Prime Minister—some of the excuses that will be offered for this change of affairs. United States interest rates have gone up. But by how much? By 1 per cent. to 9½ per cent. How does that justify an escalation in this country by 2½ per cent. to 12½ per cent.?

No doubt it will be said that the Government have been blown off course—a familiar excuse—by the bakers' strike, by the Ford strike, by the Vauxhall strike. There is only one reason—which the Chancellor ought to acknowledge—for the increase in minimum lending rate. It is that this Government, throughout their existence, have continued to spend and to borrow too much and to drive interest rates up in order to raise that money.

It is characteristic, of course, that the Chancellor has tried to take credit even for that as well, because, at the same time as he was telling the Labour Party conference about the success he had had in controlling the economy he also said—with that personal modesty we know so well—that he had put £3 billion into the economy this year, and that we should think what that would do for us.

The right hon. Gentleman may have put it in. He may have "increased" the resources of the economy in that way, but now other people, through higher interest rates, higher mortgage rates and the loss of jobs, will have to pay for the very thing that the Chancellor was boasting about at the Labour Party conference.

The Opposition want to know whether there will be other consequences and what else the Chancellor might be offering by way of fiscal or monetary penalty for the consequences of his own earlier incompetence. Will another, fuller package of that kind be announced today? If not today, will it be announced on a future occasion? When is the interest rate likely to move again?

Will the Chancellor offer any predictions this time? He told his hon. Friends in June that the rate was likely to come down within weeks from 10 per cent., and, not for the first time, they have seen it going up to 12½ per cent. How many more times will he promise his hon. Friends one thing and proceed to do exactly the opposite and continue to expect his hon. Friends to support him? How many more times will the Labour Party go on obliging the Chancellor in this way?

There was a time when the Chancellor made some rather unfriendly observations about some of his hon. Friends and said that he thought some of them were out of their "tiny Chinese minds". They might be asking themselves now, "Who is out of whose Chinese mind?" It seems to us that the Chancellor is the man who, more than most patients who consult the psychiatrist, seems increasingly to lack a true insight into his condition.

Pay is the other half of what we have to consider on inflation, and it is much too simple to argue that pay increasing faster than production is, over a long period of time, the cause of inflation. In a healthy economy, there must be a close relationship between the rate of growth of money supply and the average general total level of earnings. If one moves out of line with the other, unemployment will rise as workers price themselves out of their jobs. Or profits will fall and investment will be destroyed as companies are cleaned out of their resources. Or the public sector pay bill will expand beyond the capacity of the ratepayer and taxpayer to finance it and become destructively high. If all that happens, the political pressures on the money supply can threaten to overwhelm the political will that is seeking to control it.

It is essential that the monetary imperatives should be understood, all the more so when the Government are seeking to reduce the rate of monetary expansion. It is essential that that understanding should be reflected in a declining average rate of growth in earnings. Therefore, in that sense, we need a policy for pay. But in what sense and in what kind?

Does that conclusion—which I think nobody would challenge, as I hope it is common ground on both sides of the House—imply that a Government must intervene and fix, apart from their own employees, particular pay settlements at particular levels? Does it imply that Governments should be intervening even more fundamentally to fix the level of every settlement at the same figure as is happening today? The most sensible conclusion comes from a description of the West German economy—which the Chancellor is fond of admiring—a description given by the Federal Government: wage freezes or the fixing or limiting of wage increases are not included amongst the instruments employed in evolving the State's economic policy. That is what can be done.

In our collective past, there is scarcely a Member of this House who has not argued for exactly the same conclusion. In the manifestos on which the Labour Party was elected in 1974 and on which we were elected in 1970, we all argued for the conclusion that there should not be intervention by Government in that kind of pay bargaining, and no one, I may say, more eloquently than the present Leader of the House. I give one representative but all-embracing quotation from him: I am bitterly opposed to the idea that you can settle wages by some high and mighty authority from London, be it Downing Street, the Pay Board or anything else. How the high and mighty is fallen now that he is one of the authorities.

The Chancellor, indeed, has understood this lesson too, because in July 1977, when he announced what was then known as stage 3, his announcement was welcomed by everyone in the House, from the right hon. Member for Down, South (Mr. Powell) to his hon. Friend the Member for Liverpool, Walton (Mr. Heffer), and the Chancellor said that we now had to set about the business of an orderly return to normal collective bargaining. Surely there is no real doubt that that is the objective which we would like to arrive at, as we know that the pattern of intervention, whether blanket, rigid or selective, has all the effects we have all experienced several times.

Differentials are increasingly destroyed. Businesses that are short of skilled workers are unable to recruit them because they cannot pay them. A target is set up for militants to attack and, more fundamentally, employers up and down the country are conniving with their work people in signing contracts with the Government saying "We have complied with this policy" when they have done no such thing in arriving at agreements which they know are outside the policy. So where are we going now, and where do the Government think they are?

The Prime Minister was in full flood last week saying that 5 per cent. was the figure that had to be applied across the country, banging away at the Dispatch Box. This afternoon he was back here again saying "We are back in a world of free collective bargaining".

What is the present position? The White Paper made it clear that the settlement for any group of workers should not exceed 5 per cent. and that the Government would exercise their discretion to see whether that was happening. Will they or will they not? When, and at what figure, will they seek to exercise that discretion? What exceptions will they make, if any? What authority will they seek to exercise? Will Ford be the subject of this nameless series of sanctions, or British Oxygen or British Leyland or the bakers—and when? Is this policy to linger for ever somewhere between the Prime Minister's hand on the Dispatch Box being brandished but never used? How are people conducting collective bargaining up and down the country to know where they stand?

Is this the way in which we are to expect our society to be conducted for ever and a day? Of course, Governments should be prepared to consider the use of every weapon, but what if the weapon, as successive Governments have seen, turns out, as I suspect the Prime Minister is finding, not to work but sometimes to recoil and do more damage to the person wielding the weapon than to those against whom the discharge is directed? Is it not wise to agree, and have we not all at different stages reached this conclusion, that we ought to try to discard that weapon and discard it—because it is a very difficult task—with the utmost care? Was that not the task on which the Government embarked in July last year—namely, to return to normal collective bargaining? Is not the real tragedy the fact that the Government, having set their hand to that course in July 1977, have abdicated the responsibility and, under the guise of great strength, are now brandishing a norm up and down the country, although believing that it will not work?

The way in which this task is carried out will not be easy to follow. It should not be presented, as the Prime Minister seeks to present it, as a return to free collective bargaining, but as a difficult but necessary return to what I still insist on describing as realistic and responsible collective bargaining. The two words are important. In one sense the bargainers must be responsible for the consequences to themselves. But if bargaining is irresponsible it has savage consequences on innocent people well outside those who are party to the negotiations.

The search for responsibility implies a role for the Government. If the Government are applying the monetary policy, they must seek to inform and influence those who are to respond to that. They must consider what institutions to use, whether the NEDC or those which have worked in Germany. But they must seek not to dictate but to guide those who are following this painful path back to collective bargaining. They should not be brandishing a norm; they should be brandishing guidance and the idea of an average figure. [HON. MEMBERS: "Oh."] The Prime Minister is right to recognise the dangers in mentioning a single figure, whether it is an average or anything else. The pity is that the Prime Minister himself did not do more to minimise the damage that would follow from that.

How can one expect people to bargain responsibly and to understand the difficulties they are facing in a nation whose wealth is not growing if the Prime Minister and the Chancellor stalk up and down the country all the time talking about the "golden decade" that lies ahead, with the Chancellor at the Labour Party conference borrowing a phrase from Chairman Mao and referring to the "great leap forward" on which this nation was about to embark? Instead of presenting a single figure, it is the Government's duty to promote a discussion of the realities. They have been more concerned, unhappily, to build a short-life platform for the election that never was than to give true guidance to the people of this country.

Much more must be done if we are to get back to good sense and a sense of responsibility and to have a chance of making collective bargaining work sensibly. One thing we do not need is a return to a tighter form of price control. It is odd that the tighter price control has been, the faster prices have actually risen. If we were now to return to price control in a tightened form, it would do great damage to the job prospects of the people of this country.

Let me put to the House some ways in which we could seek to increase responsibility. I take three examples with which the House will be familiar—the disputes taking place at Ford, at Vauxhall and in the baking industry. In two out of three of those cases, the strike commenced weeks before the expiry of the agreement being renegotiated. How is that compatible with responsibility? Why was not a single voice, so far as I am aware, raised from within the trade unions or from the Government to ask "Why are you infringing agreements weeks before they run out?" In each one of those three cases the strike decision was taken not by ballot, however conducted, but at mass meetings. At those meetings the case for responsibility was scarcely even given a hearing. At some of those meetings, as we have seen on television and reported in the press, those who tried to argue the case for responsibility, either by claiming a ballot or by seeking to go to work, faced threats and intimidation of various kinds. Even now they are being faced with the threat of the loss of their jobs.

Mr. Ronald Atkins (Preston, North)

The right hon. and learned Gentleman was not there.

Sir G. Howe

I did not need to be there. One may look at what is in today's newspapers, attributed to Mr. Samuel Maddox, general secretary of the Bakers' Union. We know that there are people in that industry who have not been entitled to have a secret ballot and who are seeking to go back to work. Mr. Maddox says: Any member who works will be dealt with after the strike. They will have their cards taken off them, there is no doubt about that. Yet all that people have done—and again I quote—is to say: We asked the union to put the strike issue to a ballot but they didn't think it necessary. Perhaps our return to work will make them realise that it would have been a more democratic way to handle matters. What kind of a contribution is that to the running of a responsible, collective bargaining system? Yet, from the other side, in the union movement and outside it and in the Labour Government, none of the people who have preached to us over the years about the fundamental democratic nature of the trade union movement has raised a voice in favour of the democratic issue of a ballot in such a situation.

Mr. Eric S. Heffer (Liverpool, Walton)

Is the right hon. and learned Gentleman not aware that each union has its own particular rules, that some unions have ballots and some give their national executives the power to take actions? Is he not aware that quite often in the old days, when national executives took powers not to take strike action, they were regarded as being absolutely moderate, first-class, responsible people when the membership was clamouring that there should be a ballot because they actually wanted a strike? The right hon. and learned Gentleman really ought to know a bit more about trade union organisation before making statements of that kind.

Sir G. Howe

I do not need the hon. Gentleman to remind me—I know that he knows and cares a great deal about this matter—that trade unions have different rules regulating these matters. I do not, nor does anybody else in this House, need to be told that we cannot predict the outcome of ballots of this kind, but we say that it is very odd that the situation should continue to be accepted, without comment from Labour Members, that men who wish to have ballots in situations of this sort do not even have the right to require such ballots.

Mr. Ronald Atkins

What would the right hon. and learned Gentleman do about it?

Sir G. Howe

I am not suggesting—it is important that the House should understand this—that the House should begin to legislate by law about this issue. It is also true—the Government ought to learn this—that the House ought not to begin legislating about employee consultation in company law. In neither area should legislation be embarked upon without discussion and consultation, so at this stage I am not proposing change by law.

But I say to the Government, who seek to take their stand on democracy, on participation and on the right of people to be consulted about the conditions affecting their lives, that they ought not—as the Prime Minister was last week—to be waiting submissively for the trade union movement to make a request for legslation but should be leading a great national debate, as the Prime Minister has attempted on other issues, about why there should or should not be ballots on these matters.

After all, the Prime Minister said that he was reluctant to discuss these matters with the trade union movement for fear of causing offence. He has not been reluctant to lay down for the entire trade union movement a single pay norm to exclude the unions altogether from pay bargaining. If he is prepared to do that, should he not address himself to this?

The irony is shown in a quotation from the Gracious Speech, which states: Government are resolved to strengthen our democracy by providing new opportunities for citizens to take part in the decisions that affect their lives. Who could believe that? What decisions more affect the life of a citizen than the decision to break a contract, to go out on strike, to forgo his wages of £80 a week for the sake of a gain of £200 when it will perhaps take him years to recover his lost earnings?

Is it not time for us to hear from trade union leaders and Labour Members why people in the trade union movement should not be given opportunities, whether the rules do or do not so provide, for taking part in a secret ballot, fairly conducted? Would that not be a better method, a method worth trying, of promoting the responsibility that the Prime Minister and the Chancellor rightly say we need and that, for heaven's sake, we do need if we are to get this country back to a pattern of responsible collective bargaining?

I suspect that many Labour Members agree with what I am saying. Some of them voiced those feelings in the debates on "In Place of Strife" early in 1969. Why do they not say so? Why is there almost a conspiracy of silence on such issues? Is this not just one example of the malign influence over our economy and many aspects of our society of the Left, an example of the extent to which the mythology of the Left has in many respects become entrenched as the road block to the economic progress which everyone in the House wants? It is a road block maintained by a craven alliance—I use the word deliberately—between the Parliamentary Labour Party, many of whose Members understand the realities which I am talking about, and the economically blind but sometimes obstructive minority which wields such disproportionate influence in the Labour movement.

I am not against trade unions. I say without any fear of contradiction that the Opposition would fight a great deal more effectively for a free trade union movement than, for example, Mr. Alex Kitson, who has such an adoration for the system on the other side of the Iron Curtain.

These myths, which the Prime Minister and the Chancellor know just as well as I do, must be challenged: the myths that resources are somehow limitless; that someone else can always be coerced into paying; that industrial action, for whatever cause, is presumed to be right; that it is better to share today's work than to create tomorrow's jobs; that it is better to defend yesterday's jobs than to take part in helping to create the jobs of tomorrow.

Mr. Norman Atkinson (Tottenham)

The right hon. and learned Gentleman is out of his depth when speaking of ballots. He must have a very short memory, because night after night the House debated the issues involved in ballots during industrial disputes. Apart from the coal mining industry, where there is a single product and it is therefore possible to have a coalfield ballot prior to strike action, in all other industries, where negotiations are about a multiplicity of products, it is not possible to bargain by ballot. The employers themselves are, therefore, the first opponents of balloting because they fear—

Mr. Deputy Speaker (Mr. Bryant God-man Irvine)

Order. If the hon. Gentleman intends to make a speech, perhaps he will take a suitable opportunity of seeking to catch the eye of the Chair.

Mr. Atkinson

My point is, Mr. Deputy Speaker, that the employers themselves fear the idea of balloting because the return to work must also be decided by ballot, in the same way as the ballot is used to decide disputes—

Mr. Deputy Speaker

Order. An intervention must be reasonably brief.

Sir G. Howe

I am delighted to have at last drawn the hon. Gentleman, with his distinguished experience of the trade union movement, into discussing the merits of this matter. If the House and the country are to get back to sanity on this sort of issue, let us at least regard the subject as no longer holy ground not to be discussed but to be resolved by slogans.

The introduction of balloting must be looked at within the rules of each union and within the work situation. Of course, there will be disadvantages as well as advantages. But let us recognise that there are now many responsible people in this country who feel that they are denied rights to participate in decisions that affect them because they do not have the opportunity of balloting. That opportunity is being denied by threats of depriving them of their jobs through the closed shop. That is what we must get away from.

This is all part of the mythology to which we have been shackled by this link within the Labour Party. The great majority of people know that many of the myths are nonsense. The great majority of Labour voters know that many of the myths are nonsense. Yet the Labour Party—this is the saddest and most serious matter for the country at present— has all too often allowed itself to become a means of imposing these views of the madcap Left upon our economy and society as a whole. It is still doing so today.

As a result, there is no trade union movement in the West that has a greater political influence than the trade union movement in this country. There is no trade union movement in the West that is more militant and more firmly entrenched at the seats of power, and yet no trade union movement in the West whose members have done less well in improving living standards in the last 15 years.

We therefore have a society which is in many senses immobilised when it ought not to be. We have a mountain of institutional savings, far too much of it being consumed by Government for subsidising the present and shoring up the past. We have a tax system almost uniquely designed to be hostile to the people upon whom the enterprise of our society depends. We have a marginal rate that is still almost 5p higher than it was when the present Government came to office, and a tax threshold that has fallen from 50 per cent. of average earnings to one third of average earnings since the present Government came to office. It is a tax system that is still taking £2,500 million more in income tax out of the pockets of ordinary wage earners than it was when the present Government came to office.

As a result, we have a steady emigration of talent from the shores of this country. We have lost 5 per cent. of our population in the last decade, and almost certainly the people we can ill afford to lose. As a consequence, we have a larger and less usefully employed pool of labour at lower wages than that in any other Western economy.

What else have the Government done to change that? Since they have been in office, we have had the development land tax, the Community Land Act and a mountain of legislation in that field. Net return: a cost of £28 million, a revenue of £13 million, and proceeds of land for sale for redevelopment of about 150 acres—about one-third of one Wimpey housing estate, at the cost of huge obstructions to enterprise.

The oil industry is a blessing which we could ill afford to do without, and the Government's attitude to the North Sea oil industry ever since it has existed has been one of hostility, of regulation and of taxation.

Finally, we have the ultimate lunacy that this great responsible Labour Party conference that met in Blackpool last October voted with no dissentient for nationalising the production of North Sea oil. Why should we wonder if the oil companies of the world are taking fright at the prospect of another Labour Government in charge of this country?

Then there is the nationalisation of almost everything else that the Government can think of. What has it done for the steel industry? What has it done for British Leyland, or even for the shipbuilding industry? The Lord President would be interested to read a newspaper to which he is normally well disposed and which is not normally very critical of him—The Guardian—describing what has happened at Austin and Pickersgill since it has been nationalised. The Guardian article says: A profitable and highly efficient yard employing some 3,000 men churning out bestselling standardised cargo ships..has degenerated…into a demoralised mess in the 46 weeks since nationalisation. Productivity has slumped by 26 per cent., delivery dates are being missed, and commercial good will is being eroded…Workers…are less happy and less productive than they were a year ago. In no sense has Austin and Pickersgill become 'their' company. That is the kind of policy which the present Governement wish to go on imposing upon the people of Britain.

What else of that kind is in this Queen's Speech? The most outstanding example is the proposal to subsidise a shorter working week. The present Government were elected to office on the denunciation of the three-day working week. They are now positively planning to reduce us to a four-day working week, and paying for it. It might be legitimate in economies such as those of Germany and Japan, where it is a short-term measure for the retention of skilled labour, but in this country that kind of approach panders to all that is worst in our attitudes—less work for the same pay, more men for less output, and higher costs on the future to sustain the past. There is £500 million a year to go in that direction to save the past. Think how much better we could do if that kind of resources was being voted in tax relief and encouragement for the jobs, industries and firms of the future.

The reality is that the present Government, in every sense, have reached the end of the road. They are following a clutch of policies which make no kind of sense even to them. One policy that they are offering is the policy of monetarism. At least the Chancellor and the Prime Minister claim to understand that. None of their colleagues supports it. Their colleagues would denounce it at the first opportunity. In some ways it is not sur- prising, for the Chancellor is conducting his monetary policy almost as though he was intending to give monetarism a bad name.

The second policy is one in which neither the Chancellor nor any of his colleagues believes, but it is one to which they are committed. It is a policy of universal wage control. In the end, they have neither the skill nor the courage to undertake the difficult task of getting away from it.

The third policy in which they believe with great enthusiasm is a multiplication of the regulations applied to our society and an increase in the burden of tax applied to our society, to such an extent that the enterprise and talent of our people are almost near to being destroyed.

Those policies were rejected by an insultingly large majority at the Labour Party conference. The Chancellor received his come-uppance there, and rightly so. They surely deserve to be condemned out of hand by this House tonight.

Mr. Deputy Speaker

Did the right hon. and learned Gentleman move an amendment?

Sir G. Howe

indicated assent.

5.5 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey)

I do not think that any of us was surprised that the right hon. and learned Member for Surrey, East (Sir G. Howe) did not have the nerve to move his amendment, after a speech such as that.

I propose to deal with the two elements in the amendment. The first part criticises the Government on economic policy and says nothing whatever about what the Opposition would do in its place. The second part makes some criticism of the fact that there was not a General Election last month.

When I addressed the House in the debate on the Gracious Speech a year ago, I was able to report a dramatic transformation in Britain's financial position. Inflation was beginning to fall. The pound was strong and rising steadily. The balance of payments was moving into surplus. This year I am able to report an improvement in the real economy which I then predicted was bound to follow the improvement in our financial situation.

I was a little surprised at the mournful bleating of the right hon. and learned Gentleman about the economy, because it makes such an extremely interesting comparison with what is being said by his friends in industry and his friends in the newspapers. The economics correspondent of The Daily Telegraph had to admit the other day: Fleet Street Jeremiahs like myself are finding it remarkably difficult to find any horror stories to write about the economy at present. He was followed by a leading article in the Financial Times which said: Each successive economic indicator makes it clearer that in real terms the United Kingdom economy is performing better than for a long time past. On Monday of this week, the Financial Times monthly survey of business opinion showed that the recovery was spreading to more sectors of industry every month and that the improvement in business confidence was being sustained. Last week's survey by the CBI told the same story. It is a very different picture from the partisan twaddle we had from the right hon. and learned Gentleman.

The record is encouraging. We have maintained the financial gains that we made last year. The pound remains firm. We are paying our way in the world. We have now repaid $2 billion worth of debt to the IMF ahead of time. Inflation has been reduced dramatically to under 8 per cent.—half what it was a year ago and lower than the inflation rate in the United States or in France. Because of this and the substantial cuts in income tax during the year, the real living standard of the average family in Britain has improved by 7 per cent.—one of the fastest increases in a single year since the war.

And we have seen the improvement in the real economy which I predicted a year ago. Unemployment has fallen by 90,000 in the last 12 months. Output has been rising this year at a rate well over 3 per cent. a year. Incidentally, the right hon. and learned Gentleman was quite wrong in saying that the output this year is only 4 per cent. above what it was in 1973. In fact, last year it was already 1 per cent. above that level. In the second quarter of this year it was 4 per cent. above that of last year, and it is still rising fast.

According to the European Commission, growth in this country will be higher this year than in any other country in the Community except Ireland. As was to be hoped at this stage of the recovery, productivity has been growing fast and so has manufacturing investment. Private manufacturing investment rose in volume by about 13 per cent. last year, and looks like rising about as fast this year, too. That is twice as fast as in Germany, which the right hon. and learned Gentleman is always quoting to us as an example. Moreover, the CBI is expecting a further increase in private manufacturing investment next year as well. It is essential that that should continue if our recovery is to be sustained.

The reason that we have been able to achieve these substantial improvements in the real economy at the same time as we have cut inflation by half is, as the Prime Minister told the House last week, that we have combined the right fiscal and monetary policies with an effective policy for pay.

Our fiscal policy has been firm and responsible. We have maintained cash limits for most programmes in the public sector and have kept tight control of the contigency reserve so that public spending is within the plans in last January's White Paper. The increase in public spending on our priority social programmes during the present year is bringing real benefits for ordinary families and enabling us to make a start on dealing with some of the problems in our social services, especially the Health Service.

Next week the increase in the old-age pension will bring the pension for a married couple up to £31.20. It will be followed on 4th December by a £10 Christmas bonus for over 10 million retirement pensioners, widows and the chronically sick and disabled. The child benefit is being raised to £3 next week, and a further increase will bring it to £4 for every child next April. The annual White Paper on public expenditure will show how we intend to distribute the increase of 2 per cent. in public expenditure programmes next year.

Mr. F. A. Burden (Gillingham)

Is the recovery so great and has production increased so much when the Government have to tell us this afternoon that they are subsidising small companies to get them to take on one extra person?

Mr. Healey

I do not know whether the hon. Gentleman is in favour of my right hon. Friend's proposal. However, every Government in Europe is now giving that type of assistance, although very few of them are offering it on such a generous scale. I am proud that we are doing so.

Our monetary policy has been equally successful. In our four and a half years of office the rate of growth of sterling M3 has averaged 9½ per cent. a year. That is only a third as high as in the last two years when the Conservative Party was in power.

We had very little from the right hon. and learned Gentleman about the profligate increase in the money supply when he and the right hon. Lady the Leader of the Opposition, as she is now, were members of the Conservative Government. At that time the right hon. and learned Gentleman was busy introducing legal curbs on the trade unions. He told us this afternoon that he has learned his lesson and that he has not the slightest intention of introducing curbs again if ever, God forbid, he has the opportunity to do so. Domestic credit expansion has been kept well within the limits which I set in my letter of intent to the IMF.

In the first two years that we had some form of target for sterling M3, we undershot in the first year—8 per cent. compared with 12 per cent.—and overshot in the second—16 per cent. compared with a target range of 9 per cent. to 13 per cent. As I have emphasised several times, it is the underlying rate of growth over a period that matters rather than the absolute level on a particular day, or the figure for a particular month or two. For example, the German M3 has been increasing at an annual rate of 16 per cent. for the past three months. That is almost as profligate as the increase in the money supply under the previous Conservative Government. I have no doubt that the German M3 will soon return to a more normal situation just as ours has, as I shall show in a moment.

One of the reasons for my deciding at Budget time to switch to a system of annual targets rolled forward every six months was to be able to take account of the fluctuations that we inevitably get over a period of months in the underlying rate of money supply. At Budget time I said that 8 per cent. to 12 per cent. was the target range for the growth of sterling M3 in the 12 months ending with banking April 1979.

Full figures for banking October will not be available until next week, but it is already clear from the preliminary figures, including those published on Tuesday, that the rate of growth of sterling M3 in the first six months was below the bottom end of the target range —probably nearer to 7 per cent. than 8 per cent. This lower rate of growth in the past six months has offset the higher growth in the last months of the preceding banking year.

I have now decided that the target range for the 12 months to the end of banking October 1979 should also be 8 per cent. to 12 per cent. Although the numbers are the same, this represents a slight tightening compared with the existing range because the starting level is below the range then envisaged.

As the House knows, the Bank of England, with my approval, announced today an increase in minimum lending rate to 12½ per cent. A significant part of the increase merely validates the recent increase in short-term market interest rates in the face of uncertainties about the foreign exchange markets and United States interest rates and about pay settlements in Britain. Given those uncertainties, the Government thought it right and prudent to err on the side of caution by establishing a level of short-term interest rates somewhat higher than at present. I expect short-term market rates to rise on average by about three-quarters of a per cent., some more and some less. These decisions were necessary and they will allow for the essential financing needs of the economy and help to keep inflation at its present level.

There were many questions earlier this afternoon about the likely effect on employment of the increase in interest rates. In the past, hon. Members on both sides of the House and many economists have grossly exaggerated the effect of changes in interest rates on the real economy. It is worth noting that, although we have had a steady creep-up in interest rates over the whole of the past 12 months, we have also seen a steady increase in growth, an exceptionally high increase in investment and a fall of 90,000 in the number unemployed.

Mr. Robert Mellish (Bermondsey)

Surely it follows that tomorrow the building societies will take a decision to increase—we do not know by how much—mortgage rates. If that is so, that will have an enormous impact on millions of our people within weeks. When the Government are talking—rightly, in my view—of restraint on the wages front, it must be accepted that for many people one of the most important budgets, and one of the hardest to balance, is the repayment of loans, which will be subject to dramatic change.

Mr. Healey

If that were the position, I should regret it, as my right hon. Friend knows. However, a number of the leading representatives of the building societies have been saying for some weeks that they believe an increase in their rates is justified. The only question is how much and when.

If the Government were to follow the precedent set by the Conservative Government, fail to take timely action when necessary and lose control of the money supply, the sufferings of the whole of the British people, whether mortgages or not, would be infinitely more serious than suffering brought about by increases in mortgage rates that may at some stage, either tomorrow or perhaps in two months' time, be decided by the building societies.

Sir G. Howe

Does the Chancellor recognise that there is no point in his trying to preach that message by references to the Conservative Government? His own performance in allowing the money supply to go out of control in September 1976 gave us the best possible demonstration, when he had to jack up interest rates to 15 per cent. Will he not use his own incompetence as the lesson for the future? Will he recognise that the underlying reason why he has to increase interest rates to this extent and in this way is that he is insisting on spending and borrowing too much?

Mr. Healey

The right hon. and learned Gentleman is, as always when he attempts to animadvert on monetary policy, totally wrong and totally mistaken. The small increase in money supply that took place at the end of the last banking year, or in 1976, was the sort of fluctuation that occurs in all countries. For example, in Switzerland the money supply is running at three times the rate that the Government set themselves as a target. It is running at 16 per cent., although the inflation rate is scarcely 1 per cent. and the balance of payments is in balance.

The right hon. and learned Gentleman must accept, as everyone does, who has studied these matters, that fluctuations over a month, or a number of months, are quite normal. Those who pay excessive attention to them are giving monetarism a bad name.

It is in the light of our commitment to a firm fiscal and monetary policy that we are now discussing with our Community partners proposals to establish a zone of greater monetary stability in Europe. I gave evidence at length on the European monetary system to a Sub-Committee of the Select Committee on Public Expenditure last week. However, it may be convenient if I tell the House the main features of our approach.

The Government believe that the turbulence of international financial markets has been an important obstacle to growth throughout the world over the last few years, and particularly since the weakening of the dollar which began in the summer of 1977. That is why the Prime Minister included monetary stabilisation in his five-point plan for the Bonn summit.

We believe that the measures announced by President Carter last week will make an important contribution towards greater stability in the dollar exchange rate, and will thereby help to reduce the turbulence of currencies worldwide. But, as the Prime Minister said last week, we must use the time gained by President Carter's measures to produce a better system of monetary order worldwide, because the weakness of the international system is an important factor in the recent currency instability inside Europe.

It is the effect of weakness of the dollar on the external value of the deutschemark which has been mainly responsible for the divergence between exchange rates in the European Community in the last year or so. Sterling has remained relatively stable throughout the turbulent conditions of recent months. In terms of the effective rate for sterling, which is the measure of sterling's overall external value, the pound has for the most part moved within a relatively narrow range between 61.5 and 63. The dollar rate has fluctuated sharply, but we have been far less subject to pressure in this respect than the deutschemark.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The Chancellor of the Exchequer said that the Government believe that the turbulence caused by the instability of the dollar in the last year had been inimical to growth. Will he explain why we had absolutely no growth at all in this country until the dollar started to be turbulent, since when we have had 4 per cent. growth, on his own figure?

Mr. Healey

We have had 4 per cent. growth over the last year because of the excellent mix of policies of the present Government, which I have been describing to the House. I am extremely grateful to the hon. Gentleman for drawing my attention, and the attention of the House, to the achievement of the Government.

As I explained in my speech at the Mansion House, the recent stability of sterling has contributed to the success of our counter-inflation policy and has reflected it. We aim to maintain this stability in our exchange rate whether or not we join the European monetary system. That means that we must keep inflation under control. We have shown many times—and again in our decisions today—that we are prepared to use the whole range of economic policies for this purpose.

If we in the European Community are able to create a zone of greater monetary stability among ourselves, we can make an important contribution to the better international monetary order at which we aim.

But an essential condition of exchange rate stability inside the Community is compatibility in the economic performance of the members of the system. Therefore, a concerted strategy for economic convergence is the key to the success of a European monetary system. Earlier this year the Community carried out valuable studies on such a concerted strategy, and these studies formed a basis for commitments entered into at the Bonn summit. We believe that this concerted strategy for growth without inflation must be further developed in the coming years, and Britain intends to play her full part in formulating and carrying out such a strategy as the necessary foundation for a successful European monetary system.

It is also necessary, if such a system is to be durable, that the financial flows arising from the Community mechanisms should help towards this convergence in the economic performance of its members. At present, the net flows of resources brought about by the Community Budget and the common agricultural policy do not reflect the relative prosperity of the countries concerned. That is why the Heads of Government in Bremen agreed to study means of producing a less perverse flow of resources within the Community concurrent with discussions on the monetary aspects of the EMS.

It is against the need for concerted action to produce convergence in our economic performance, and for progress towards a more rational flow of resources within the Community that we approach the question of guidelines and techniques for intervention in a possible European monetary system. Intervention is worse than useless if the underlying economic conditions are not right, and it is fair to say that this was a view which was generally held by members of the Select Committee whom I addressed last Friday.

We start from the firm belief that a European monetary system must not have a built-in deflationary bias, and that for this reason the economic and financial obligations it entails must fall on the stronger countries no less than on the weaker ones otherwise a greater stability in exchange rates will be achieved only by compelling the weaker countries to adopt unnecessarily deflationary policies, so reducing growth in the Community and, indeed, in the world as a whole.

If the proposed arrangement is to be durable, it must be significantly different from the existing European joint float or snake. The present snake system performs a useful function for Germany and four of her smaller neighbours, one of which, Norway, is outside the Community. But it has proved incapable of containing the three larger Community countries—Britain, France and Italy. All of them were compelled to leave the snake, France on two occasions and Britain after seven weeks, under the previous Government. In most cases they left after heavy losses of reserves. It would not be in the interest of either currency stability or of the wider aims of the European Community to repeat that unhappy experience.

Another lesson of the snake is that the existing procedures through which realignments of parities within the system must take place tend to mean that realignments are preceded by heavy intervention, which produces a massive inflation of the money supply in the stronger countries and a damaging loss of reserves in the weaker countries. Dr. Emminger of the German Bundesbank has drawn particular attention to this problem, and rightly so.

We are at present discussing with our Community partners possible ways of avoiding these dangers. These discussions inevitably involve considerations of highly technical matters such as parity grids and ECU baskets. Discussions which affect exchange rates must be conducted in private if they are not to provide speculators with an instruction book on how to get rich quick at our expense.

I cannot conceal from the House that we have serious doubts about the wisdom and durability of the arrangements at present favoured by some of our European colleagues. I hope that we shall be able to resolve these problems in the coming weeks, and I look forward to debating the matter in the House before the summit meeting takes place on 4th December, but I think I should make two elements in our position absolutely clear now.

First, the reason that we oppose some of the technical proposals for intervention which have been made is that we believe they might break down in practice and produce greater turbulence rather than greater stability in the exchange markets. We do not, however, regard the intervention mechanism as the beginning and end of a European monetary system. If it were, the system would not survive for long, as I have explained. We believe that the concept of developing the ECU into a new reserve asset should be, as suggested at Bremen, the centre of the system, and that existing credit mechanisms in the Community should be further developed to support it. Moreover, we believe that recent experience has shown that far more attention should be given to relationships between the Community system and the wider international system if we are to achieve a zone of monetary stability in Europe.

The second point that I should like to make at this stage is that, because we regard the control of inflation as a precondition for higher growth and lower unemployment, we aim at stability in our external rate, in or out of an EMS. We do not regard depreciation as a soft option or as a cure for our economic and industrial problems.

Mr. Nigel Spearing (Newham, South)

Is my right hon. Friend aware that yesterday Lord Goronwy-Roberts, in another place, talked about a further Government statement on EMS and possibly a Green Paper? Can my right hon. Friend say whether the statement he has made is the statement which the Government had in mind, or will there be a Green Paper on this prior to the debate? Secondly, he refers to the decision of the summit on 4th December. Is it not the case that this meeting of Heads of Government is extra-treaty? Can we assume from that that, some decision having been come to, there will be a further meeting of Finance Ministers finally to agree the details? If that is the case, can my right hon. Friend say when that will be?

Mr. Healey

The Government propose to publish a Green Paper in good time for the debate. It is too early to be certain of what decisions, if any, will be reached on 4th December. Each Head of Government will attend that meeting with the constitutional powers which he holds as Head of Government. In our case, no decision could be taken which required legislation or which had important implications unless it were later put to the House for approval. Whether there would be further decisions required following any decision in December it is too early to say. It may be possible for me to throw more light on that when we debate this point before the summit meeting on 4th December. I hope that that answers my lion. Friend's questions.

Mr. Ron Thomas (Bristol, North-West)

Will the Green Paper contain a detailed evaluation of the areas of economic sovereignty which will be eroded if we join a scheme of this kind? Is my right hon. Friend aware that all that the press seems to talk about is bringing about a stability of exchange rates, without taking into account the fact that monetary policy, public expenditure and a whole range of other economic variables as well as economic sovereignty will be affected?

Mr. Healey

The Government and the House will have to make up their minds and come to a decision as to the extent to which their freedom to act in the economic sphere will be greater or less as a result of joining the system. The only point that I make at this stage is that no one should imagine that any British Government—indeed, these days, any Government in the world—have total freedom or total sovereignty in these matters. We are now members of an extremely complicated commercial, financial and trading system. This inevitably imposes all manner of limitations on our freedom of action which we are prepared to organise in discussion with foreign countries—as, for example, we are seeking to do now in the Tokyo round—to try to reach agreement on a freer world trading system. This Government, like every government, will have to make up their mind ultimately whether they gain or lose more, either in sovereignty or in other areas, as a result of joining whatever system emerges from the discussions. I know that the House will expect the Government to form their judgment on that basis, and I expect that the House will do so, too.

I come now to the question of pay on which the right hon. and learned Member for Surrey, East spent some part of his speech. Fiscal and monetary policy alone are not likely to control inflation or to lead to a fall in unemployment unless they are accompanied by moderation in pay settlements. That is why we regard pay policy as the essential third leg of the stool, to use the Prime Minister's analogy. It is no accident that Britain is almost the only country which in the past 12 months has achieved not only a dramatic fall in its inflation rate but a significant drop in unemployment. Most of our European partners have achieved a reduction in their inflation rates, but at the cost of some increase in unemployment. The United States has cut unemployment at the cost of an increase in inflation.

Pay policy is the factor which has enabled us to halve our inflation rate and cut unemployment at the same time. It is because there is a livelier perception of this fact developing all over the world that the Governments of the United States, Belgium, Holland, France and Italy are now considering, with their trade union movements, how they can develop effective policies for pay.

So far as I can see, the Opposition do not contest the truth of what I say, namely, that fiscal and monetary policy alone—although they may in the long run reduce inflation—cannot reduce unemployment. The Opposition accept that by relying on fiscal and monetary policies alone they would increase unemployment. The right hon. and learned Gentleman has admitted that the £5 billion worth of cuts he proposes in public expenditure are bound to lead to an increase in unemployment, at least in the short run.

The sort of monetary policies which the right hon. and learned Gentleman and his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) continually espouse would be certain to produce unemployment on a far greater scale than we see today. In reviewing the prospects for Britain to December 1979 the economic review published by James Capel and Company in August—I am happy to see the hon. Member for Horn-castle (Mr. Tapsell) in his seat—pointed out that if the monetarist policies of the Opposition were adopted in the second half of 1979 rising inflation together with an attempt to reduce simultaneously the increase in the money supply could produce a monetary squeeze which, combined with cuts in public expenditure, would lead to a recession. Sole reliance upon the control of the money supply, albeit with a consistent fiscal policy, could lead either to the abandonment of the monetary guidelines themselves or to an attempt to come to some accommodation with the trade unions over incomes policy. I have quoted this forecast because it appears under the name of one of the Opposition's official spokesmen on economic policy, the hon. Member for Horn-castle, whose eloquence in attacking the policies of the majority of the leadership of his party was illustrated by another quotation by the Prime Minister last week.

Mr. Peter Tapsell (Horncastle)

Has the right hon. Gentleman so lost confidence in his own case that he now has to fall back on the scribblings of teenage City analysts?

Mr. Healey

The hon. Gentleman is being a little unkind to himself. If he does not like that quotation, let me read a quotation directly ascribed to him in the Official Report of 6th July 1976 when the hon. Member said: Those people who wish to rely solely on control of the money supply and do not wish to have an incomes policy are entitled to say that it could stop inflation. I do not doubt that if we pursued a sufficiently rigorous control of the money supply we would bring inflation virtually to a standstill, and that would be a very desirable result to achieve, but the price we should have to pay for that would be very high. The price in terms of the level of unemployment and the level of bankruptcies in industry, the City and agriculture would be an intolerable price."—[Official Report, 6th July 1976; Vol. 914, c. 1238.] I do not regard that as an adolescent remark. I regard it as pregnant with economic wisdom. I am sorry that the hon. Gentleman should denigrate his intellect in the way that he sought to do a moment ago—even if he might curry favour with his right hon. Friend by doing so.

Mr. Tapsell

As the right hon. Gentleman may recollect, the Prime Minister has already done me the honour of quoting that remark of two years ago during the first day's debate on the Gracious Speech. The fact is, as my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) made clear in his speech today, that no one on the Tory Benches is advocating an immediate and abrupt cut in the money supply. If it is done gradually and steadily over a period of years, the dangers to which I was pointing then would not arise.

Mr. Healey

I apologise for embarrassing the hon. Gentleman. If he wants to remain a member of the Shadow Cabinet—which is a precarious role these days, I understand—he will have to watch his words as carefully as some of his hon. Friends have had to watch their votes. The hon. Gentleman is quite right. The Opposition's policies are a recipe for recession.

The Government's mix of fiscal, monetary and pay policies is best for Britain because it is the only way in which we can hope to reduce inflation and unemployment at the same time. That is why the Government felt it necessary to lay down a guideline for pay settlements in the White Paper last July. That is why the Government are determined to do everything in their power to see that the guideline is observed, We chose 5 per cent. as our guideline because, as the Prime Minister told the House last week, if the general level of settlements comes out at significantly more than 5 per cent., the level of inflation will not go down. Moreover, any excess will throw people out of work as well as raising prices. It is because the overwhelming majority of the British people now know that this is a fact that our pay policy has their overwhelming support. If anyone doubts that, let him ask the electors of Berwick and East Lothian.

Nobody knows better than I the disadvantages of laying down a single figure as a guideline for individual settlements even when, as is the case this year, we provide for flexibility through use of the kitty principle, through self-financing productivity deals, and so on.

So far as I can detect the latest policy of the right hon. and learned Gentleman—we discover him in a different posture every time the fog surrounding his opinions clears for a moment or so—this week he, like his right hon. Friend the Member for Lowestoft (Mr. Prior), believes that 5 per cent. is the average which the country can afford, but that it should not be treated as a guideline for individual settlements. The right hon. and learned Gentleman does not confirm that. The fog has descended once again. No doubt we shall see him sitting there like a wounded boar the next time it clears.

Mr. Ridley

Will the right hon. Gentleman give way?

Mr. Healey

If I may finish with the right hon. and learned Gentleman, I shall be glad to defer to the hon. Gentleman.

I understand this approach which the right hon. and learned Member for Surrey, East has espoused—that 5 per cent. is right as an average, but not for individual settlements—because I hoped last year, with the rest of the Government, that we might be able to achieve the necessary responsibility in collective bargaining simply by making clear what increase in earnings the nation as a whole could afford. Indeed, as Opposition Members have often pointed out, I expressed this view in an exchange of letters with the right hon. Member for Lowestoft. But we learned from hard experience that any figure which is published—whether described as an average increase for earnings or wage rates or as a guideline for individual settlements—is likely to be treated by negotiators as a minimum which they must aim to achieve.

As this became clear during the early negotiations in the last pay round, we found ourselves compelled to treat 10 per cent. not. as we had hoped, as an average around which individual settlements should cluster—some higher, some lower—but as a maximum limit for all settlements. When we did so, we found it necessary to answer the questions which had been put to me in August by the right hon. Member for Lowestoft. In his letter to me on 7th August 1977, he had said that without early knowledge of the answers to these questions, bargainers will be thrown increasingly into confusion and so will the fight against inflation I readily admit that on that occasion he was right and I was wrong. But we have learned from our experience while he, having failed to convince his colleagues that he was right, has now moved to the position which he criticised me for adopting 15 months ago.

The question which the Government are now considering with the TUC is whether it will be possible to introduce more flexibility into the 5 per cent. limit without jeopardising our overriding objective, which is to keep inflation from rising once again. On this objective there is no difference whatever between the Government and the TUC.

Our discussions are still proceeding, and I will, of course, inform the House as soon as they are concluded. They have not been easy. The Government remain convinced that the policy they have adopted in the White Paper is the best means of keeping inflation under control.

The TUC, for its part, remains committed not only to the process of voluntary collective bargaining but to the belief that, properly conducted, such bargaining will result in settlements consistent with our agreed inflation objective. But our discussions have been marked by a continuing and, I think, growing determination on both sides to discover and define areas of agreement which are consistent both with this difference in our approaches and with our common determination to keep inflation down. That is why we trust that they will soon be crowned with success.

Mr. Ridley

The Ford settlement is likely to be over the 16 per cent. plus which has already been offered by the Ford Motor Company. Will the Chancellor apply sanctions against Ford? If so, what will they be? If he does not apply sanctions, does it mean that the 5 per cent. has now become 16 per cent. plus? Will he tell us how this situation is conceivably compatible with the policy that he had two months ago?

Mr. Healey

I hesitate to apply to the hon. Gentleman the epithets that the hon. Member for Horncastle applied to himself. The hon. Gentleman knows perfectly well that no Government will take a decision on this matter before knowing what the final settlement is. When the settlement is reached, we shall announce our decision to the House, to the country and to the Ford Motor Company.

I turn finally to that part of the Opposition's amendment which concerns the deferment of the election. The amendment as a whole, as the newspapers pointed out, was skilfully drafted to conceal divisions in the Conservative Party and to tempt members of other parties to join the Conservative Party in the Lobby, although they detest everything that it stands for. It attacks the Government for not holding the election in October. I know that it means what it says on that. I suppose it did not very much like seeing all the money that it had spent on its advertising campaign pouring down the drain. But I wonder how sincere its regret is now in the light of the Berwick and East Lothian by-election and the latest Gallup poll.

The Conservative Opposition describe the purposes of an election in the amendment as being to elect a new administration capable of creating a lasting prospertity in which all can share. I can only conclude that the meaning of that is a new Labour Government with an overall majority in the House. It cannot mean a Conservative Government, because the Opposition are committed to policies which would reduce prosperity and prevent it from being shared fairly.

I have already quoted official Conservative spokesmen as saying that their policies would increase unemployment and produce recession. The policies of the right hon. Member for Leeds, North-East and the right hon. Lady the Leader of the Opposition, with their attacks on the very concept of equality, the concept of entitlement to social security benefits, public expenditure cuts, which would include massive increase in council rents, cuts in the National Health Service, payment for hospital beds and enormous increases in school meal charges will not contribute towards equality and better sharing whatever prosperity the country is still allowed if the Conservative Party ever achieved power. These will be the admitted results—admitted by them—of those policies which they have allowed us to know something about.

The real problem is that there is an enormous area of total obscurity about the Conservative Opposition's policy on some of the major issues facing the nation. That area of obscurity conceals violent disagreements inside the Conservative Party. I am talking now of disagreements not between the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) or Oswestry (Mr. Biffen), on the one side, or Moby Dick—the right hon. Member for Sidcup (Mr. Heath)—on the other, but between members of the Shadow Cabinet, and never was the word "Shadow" more richly deserved. The fact is that they tried to conceal their intentions and divisions in what way they thought was the run-up to the election by an expensive advertising campaign characterised mainly by dishonesty and outright deceit.

For example, two years ago the right hon. and learned Member for Surrey, East told us that to use the present…unemployment figures as a stick with which to make political capital was something with which the Conservative Party would have nothing to do with". Then we get Saatchi & Saatchi producing a queue of unemployed who turn out to be not real unemployed but layabouts from the North Hendon Conservative Association.

We then had one of the most delightful episodes in recent political history—the saga of Sarah Cramp. I quote from the Daily Mail: Pensioner Sarah Cramp revealed today how she was tricked into playing the part of a hard up widow called Annie for a Conservative Party political broadcast…Mrs. Cramp said today: 'That was all nonsense. The film crew deceived me.…I don't blame the Labour Government for inflation. And if the Labour Party asked me to do a film for them I would agree'. I can understand the dismay of the Conservatives at the thought of all that money pouring down the drain. Now, of course, they face the run-up to the real election—not the "phoney" one they tried to force us into—and they will face, in every debate in this House between now and whatever is the date of the election, the need to define their policies on the central problems facing the nation today.

The right hon. Member for Lowestoft told the television viewers the other day that a statutory pay policy might well have to happen under certain circumstances. But his right hon. Friend the Member for Leeds, North-East was nervous at the Brighton conference of his party even about the policy designed in "The Right Approach". I am not surprised that he was nervous about that, because the reference to the pay policy in "The Right Approach" was a pretty uncertain trumpet. It said: Experience does not suggest that (a prices and incomes policy) is the best way of finding a long-term solution to the problem. The same experience demonstrates the unwisdom of flatly and permanently rejecting the idea. What a magnificent prospectus for the people who claim the right to govern the country to put before the electorate.

Mr. Angus Maude (Stratford-on-Avon)

It occurs to us to wonder whether the right hon. Gentleman would take a little time off from creating imaginary divisions in our ranks to explain how his own party conference rejected by a two-to-one majority the policy that the Prime Minister said was essential to the success of the Labour Government.

Mr. Healey

That was a pretty feeble intervention. Let us consider the major issue facing the country in foreign affairs, Rhodesia, which was debated over the past two days. The only positive idea for solving the Rhodesia problem put forward on Tuesday was a request to the Prime Minister to use his unique skill and authority to solve the problem. That was the only thing the Opposition had to suggest. When it came to the question of sanctions, members of the Shadow Cabinet opted out of a decision entirely. They sat huddled in a nervous neutrality while a third of their party voted against the Whip they had imposed.

There has been an interesting change in political fortunes in the last few months. Only a week or two ago the Leader of the Opposition was presenting herself as a sort of Good Queen Bess who would launch us on a new Elizabethan age. She now resembles nothing so much as the last Empress of the Manchus, raging and impotent in the ruins of her summer palace while her empire crumbles into dust around her.

I ask the House to reject the Opposition amendment.

5.54 p.m.

Mr. J. Enoch Powell (Down, South)

Towards the end of his speech the Chancellor of the Exchequer did pay some attention to the terms of the amendment to the Address. I think it is right that the House should do so, since, after all, it is upon that proposition that the House will come to a decision at the termination of the debate. He passed lightly over a phrase in that amendment on which I think we should dwell a little longer. It refers to the opportunity to elect an Administration capable of creating a lasting prosperity". When I read those words, it occurred to me that the Greeks had a word for it. To assert that an Administration can create lasting prosperity is an assertion that no self-respecting politician ought to allow himself to make. Least of all should such an assertion come from a party which once had some affiliation with Toryism. It is indeed possible for Administrations to assist to some extent the endeavours of a people. It is certainly possible for Administrations more seriously to hamper them. But to suggest to the House and to the people that an Administration is capable of "creating a lasting prosperity" falls under the definition of hubris; that is, arrogance which brings upon itself its own downfall. We are not entitled to pretend that we in this House can create lasting prosperity; but it is our business as far as possible to ensure that what we do takes us in that direction rather than carries us further away from it.

It was no accident that the greater part of both the two speeches with which this debate opened was concerned with the subject of incomes policy or control of wages—give it what label one pleases. If one were to ask most members of the public what they apprehend as the most worrying aspect of our life they would point to the intersection between inflation and industrial relations, to the incessant disturbance and anxiety created by that intersection.

There is a paradox here. The paradox is that if one looks at the statistics, whether they be statistics of days lost or numbers on strike and so on, one does not find that this country is at all high in the league table. We do not appear to be suffering from difficulties of industrial relations or interruptions of production more than many other nations. Yet the fact is that our industrial relations stand at the centre of our anxieties in a way that they do not in most other countries. We have so contrived it—we have arrived at such a state—that every negotiation, every interruption of production, every bargain—I do not need to say every strike—is front-page headline news, is seen as a crisis in the relations between Government and governed, as an event upon which the outcome of the fortunes of this country turn.

I do not believe that the paradox is an unreal one. I do not believe that it is simply due to misapprehension on our part, something febrile in our constitution whereby we take excessively seriously things which are shrugged off in other countries. Still less do I believe that it is due to some obliquity of the British media, which causes them to publicise that which in other countries is not regarded as having anything like the same news rating.

Mr. Ronald Atkins (Preston, North)

Could the right hon. Gentleman not argue from a different premise—that, in fact, the organs of publicity create this feeling? He is surely speaking in a subjective way when he compares this country with other countries in assuming that basically feeling is less concerned about industrial relations in other countries than this one.

Mr. Powell

That is indeed a different premise from the one upon which I was arguing; and I hope that the hon. Member will suffer me to proceed upon my own premise. I do believe that the media are not mistaken in what they regard as newsworthy. What they regard as newsworthy we have made newsworthy by our policies over the years, by the legislation of this House and by the behaviour of successive Administrations. We have contrived that every industrial dispute, every bargain, every discussion over wages, every alteration in differentials shall be not merely represented but openly seen as a direct clash of authority and of wills between the State and the citizen.

That is the truth of this paradox. This is a damaging reality: it is not just a minor worry at the breakfast table which passes away as people get down to their daily work. It damages our industrial morale. Certainly it damages the views which others and we ourselves take of our situation. It embattles one section of the community against another and the citizens against the State. It creates deep division where there ought to be harmony—by "harmony" I do not mean agreement, but there can still be harmony where people are arriving by bargaining, by industrial processes, at a conclusion which somehow has to be reached.

If this evil could be banished, if somehow we could be rid of this paradox which has darkened our affairs for many years and does so to this very day—one can take the newspapers on any day and see that the news still conforms to my description—we might claim that we had done something to help and not to hinder.

There has been a change—and a helpful change for the purposes of this de- Bate—in the assumptions with which the relationship between inflation and industrial relations is approached. It is generally accepted now that there cannot be a general increase in earnings unless additional money has been previously created to finance that general increase. I can remember times when that was disputed. I do not think that it is disputed today. Everyone understands today that it is not possible for one wage increase to be followed by another until the whole gamut is complete unless the prior condition is fulfilled that there shall be additional money to enable those increased wages to be paid. Sometimes I think that even the right hon. Member for Sidcup (Mr. Heath) has received some intimations of this truth.

But still people say—and I want to ask why this is—that nevertheless we cannot let the natural consequences follow, namely, that the increase in wages will accommodate itself to the money supply available for paying it. It is that refusal which lies at the heart of the struggles which go on year after year and are going on in boardrooms and in factories at this very moment.

There are two alternative reasons which, so far as I can see, are produced. The first is that the level of inflation can be reduced not only by preventing the increase in the money supply which would finance it but through large numbers of recipients of income voluntarily declining to accept money which is on the table and available to be had; that, as it were, the trade unions and the great processes of industrial bargaining can bring about a fall in the velocity of circulation, so that, for the same increase in the quantity of money, there is a lesser final effect upon the prices of goods and services.

Theoretically, that would probably stand up. Theoretically, the proposition makes sense. But I have only two comments to make about it. The first is that I do not think anyone seriously believes it. I do not think anyone seriously believes that it is possible to have a wages policy which will succeed in neutralising the actual rate of increase in the supply of money, or that there exists that degree of self-restraint and altruism in the collective breast of millions of our fellow human beings.

The other observation which I have to make—and it is very pertinent to the exchanges which occurred between the Chancellor of the Exchequer and the hon. Member for Horncastle (Mr. Tapsell)—is that if a given fall in the rate of inflation, say a fall of 50 per cent. in one year, was achieved partly by restraint and only partly by control of the money supply, the effects of that sudden fall upon employment would be exactly the same as if it had been achieved wholly by control of the money supply. It is the sudden change in the rate of inflation which causes the unemployment, and not the causes, whatever they may be, by which that change in the rate of inflation is brought about.

However, I leave on one side that explanation and theoretical base of wages policy because I do not believe that people have really accepted it sufficiently to have ever been willing to argue it through. At least, I have never heard the theory of it argued through in this House.

So I turn to the alternative theory which is voiced. This one we hear from all and sundry, and it was referred to earlier in both the Front Bench speeches. It is that if inflation is to fall from 10 per cent. to 5 per cent., if the growth of the money supply is to be such that overall no more than the 5 per cent. increase in earnings is to be payable but some trade unions, industries and firms obtain exorbitant wages for those whom they represent or employ, the result will be that they will push either those persons or other workers somewhere else out of employment.

There is a bifurcation in this alternative. The argument either goes on "When the Government see that happening, when they see large wage increases being given for large numbers of persons, they will betake themselves to inflation in order to neutralise the consequences", or else "If the Government let the consequences follow, those consequences will be an increase in unemployment". I dismiss the former fork of the bifurcation by saying that at any rate I have never belonged to any Administration and I have never heard tell of any Administration where at a meeting of the Cabinet, upon the Secretary of State for Employment announcing that there had been what he would call an "inflationary" pay settlement in this or that industry, the members of the Cabinet all said with one accord "We must ask the Chancellor of the Exchequer to create some more inflation." It just does not happen in that way. It does not happen that Governments deliberately set out to create inflation in order to neutralise either a particular wage settlement or a whole series of wage settlements.

So we come to the proposition in its most naked form, namely, that unless wages are controlled or guided—controlled in some sense of the word "control"—the trade unions will bargain their members and other workers out of their jobs. That is what it comes down to in the end. It is no more than that. The proposition is that the unions will insist on obtaining settlements which are inconsistent with what is actually going to be the supply of money during the period ahead.

I do not know whether that proposition is more insulting to the trade union leadership or to the rank and file. It is insulting to the trade union leadership because, to say the worst one can about them, at least this is a class of men who have been trained, specialised and selected in a hard school to do one thing—to ascertain with reasonable accuracy the maximum earnings which will be obtainable in their firm or industry without putting their members out of a job. If they cannot do that, if they cannot perform that specialised function, it is unlikely that we can create an organ of the State that can do their job for them better than they do it themselves.

The alternative hypothesis and the alternative insult is just as gross. That is to say that 95 per cent. of 97 per cent. of the workers are such mute, dumb sheep that they will follow those who are demonstrably bargaining them and their fellow workers into unemployment. Of course, there are cases when a bargain goes wrong. The essence of all estimates is that sometimes one gets the estimate wrong. However, what is beyond all belief is that as a general rule, overall and year by year, the workers follow trade unions which are bargaining them into unemployment.

So the last logical basis for control of wages disappears. There is no rational basis for it whatsoever, unless we are prepared to make the assumption that we are dealing with men—either the leaders or the rank and file of the trade unions—who, year after year, apparently happily and with total satisfaction, engage in self-destructive folly. If one checks back at the experience of previous years, one will not often find a case, even in the most contentious settlements, where it turned out afterwards that the settlement was very far from the relativity which could, as proved by after events, be maintained.

Yet, after all these years, we continue, upon no rational ground, to court and enforce this daily, weekly clash between authority and the citizen. We go on erecting into a divisive force in our society and industry the perfectly ordinary process of continuous reassessment of the relative remuneration and value of the different skills and tasks.

One might well exclaim with St. Paul Oh miserable us! Who will deliver us from this body of doctrine? If the Conservative Party and the Opposition Front Bench could indeed perform that function, whatever other considerations there were, one might be inclined to forgive them for the hubris in their amendment, give them the benefit of the doubt, and support it

Mr. John Watkinson (Gloucestershire, West)

I have been following the right hon. Gentleman's argument closely. He has intimated that in the private sector there are clear limitations to what the trade unions can bargain. Against what do the trade unions bargain in the public sector? Is it the money supply limit which has been determined, and does that not then become a form of incomes policy?

Mr. Powell

Bargaining in the public sector is in the context of the total economy. If one wishes to recruit nurses for the hospital service, one has to find what price one needs to pay for that job to compete with the relative attractions of all the other jobs in the community. Of course there must be a budget in the National Health Service. Of course the Secretary of State has to decide within that budget—this is his only creative function and he can only do so to a slight extent year by year—where he will put the emphasis. He has to decide whether he will put it on strengthening the nursing side or some other sides of the Service. But it is a fallacy to suppose that the State, as employer, is in an essentially different situation from the private employer in the fixing of remuneration.

I return to the question whether we have been offered any escape, any answer, to this predicament with which we have been tormented for so many years—this intersection of the problem of inflation with industrial relations.

I have not only listened intently this afternoon to the speech by the right hon. and learned Member for Surrey, East (Sir G. Howe), I have been an addicted reader of the Leader of the Opposition's speeches and other sources of illumination on Conservative thinking. I detected one formulation in recent weeks. It came from the Leader of the Opposition. She said that the Government were quite wrong and rigid in fixing a norm. She said that it would not work. What one had to do instead, she said, was to fix an average.

There seems to have been some thought going on since then. I held my breath as the word "norm" was uttered by the right hon. and learned Member for Surrey, East. He used the word "brandishing". For a moment I thought that he was going on to say "brandishing an average"; but no, he was "brandishing guidance".

Let us, however, return to the attempt by the right hon. Lady the Leader of the Opposition. Her's was a valiant attempt. It is true that a norm will fail because one cannot select—and if one tries to select, one will be wrong—which cases are to be above and which below the norm. It is the old problem of who are to be the exceptions, and nobody wants to be the exception. So nowadays the Government have a norm which is a maximum, hoping that people will arrange themselves below that ceiling.

But the Leader of the Opposition's average will not work at all. All average is ex post facto. One can arrive at an average only when one finds out what the increases have been in a period of time and then averages them out. While the events are rolling—while Ford is on strike—no one can predict what average will be the outcome of a 16 per cent. settlement for Ford, 5 per cent. for somebody else, nought per cent. for somebody else and minus 5 per cent. for another group of workers. It is a counsel of despair.

If we have embraced the truth—as I hope we have at last—of the relationship between monetary policy—monetary behaviour—and inflation, we have in our hands the key to free collective bargaining; that is, we have the means to take the State out of these industrial relations and to allow the people occasionally to make their own mistakes, but usually to make the right assessments.

Mr. Dan Jones (Burnley)

Dare we do that?

Mr. Powell

I do not know whether the Labour Party dare and it is obvious that the Opposition do not dare. They are like the members of a heathen tribe who have been converted to Christianity but are not quite sure about its truth. So they think they had better continue worshipping the old gods on Saturday as well as going to church on Sunday.

There is no justification of an overwhelming national interest in substituting an average in preference to a norm for the mistaken policy of confrontation—a skilful form of confrontation but nevertheless confrontation—which is still being pursued by the Government. On the ground of that general consideration one would not feel obliged to support this amendment.

But my hon. Friends and I have also to look at the amendment from a more particular point of view, a point of view more directly germane—peculiarly germane—to the responsibilities with which we were charged when we were sent to this House. There was published today the Bill to give full representation in this House—to give justice, as the Secretary of State for Northern Ireland said earlier—to the Province which we represent. That act of justice was one of the major tasks which we were instructed to fulfil, if we could, when we were sent to this Parliament.

In what I am about to say I mean to cast no aspersion upon any other party, for it is of the utmost importance for the future of Northern Ireland that that act of justice is going to be performed with the almost unanimous consent of the House of Commons, first, in the Conference of Mr. Speaker, in which there was only one dissenting voice and, secondly, by the agreement of all but one of the political parties, and that one an individual hon. Member. That is something of too much value for me to discount it.

Nevertheless, I say that, presented in this Session of Parliament with the achievement of that legislative act, an act which we believe in all conscience will be beneficial and peaceable to all classes and persons in Northern Ireland. it must be a compelling duty upon us to see it through on to the statute book. We are duty bound not to suffer, so far as in us lies, this Session of Parliament to be brought to an end until that act of justice of the House of Commons has been enshrined in a statute

Fortunately, there has been no painful dilemma which we have had to resolve between the national interest as a whole and our own peculiar duty. Neither in the general nor in the particular would we feel justified in supporting the amendment which is before the House tonight.

6.24 p.m.

Mr. John Home Robertson (Berwick and East Lothian)

I do not see how I can adequately follow the right hon. Member for Down, South (Mr. Powell) in his expert demolition of the case presented by the Front Bench of the Conservative Opposition, but in rising for this first time to address the House I am bound to refer to my great predecessor, John Mackintosh, the former Member for Berwick and East Lothian.

This House, and the country as a whole, can ill-afford to lose men of his stature. He was an inspiration to many of us, not least his constituents. I well remember how only 12 years ago I, like many young people at that time, was a cynical youth convinced that all politicians were by definition liars. Nevertheless, I went along to the election meetings of the various parties in my local village school at Paxton and that was when I first heard and saw John Mackintosh. He impressed me then, and he continued to do so right up to his death, with his eloquence, learning, wit, hard work and, above all, his integrity. The great quality which he possessed of saying and doing what he thought was right, rather than what might have seemed convenient, earned him the respect and the affection of people of all political persuasions throughout the constituency.

Many hon. Members must have been impressed during the run-up to the by-election by the genuine sense of loss and distress expressed by so many people throughout Berwickshire and East Lothian, both at meetings and on the doorstep, at the loss of their former Member of Parliament. There is a lesson for all of us in this. If we are always open and stick to what we believe in we may not always be able to satisfy our Whips, but in the end we shall earn the respect of our constituents. I believe that they are the people who really matter to us.

John Mackintosh was one of the great pioneers in the argument for devolved power for Scotland. He was also one of the main advocates of British participation in the European Community. It is extremely sad that he has not lived to see the democratic elections to the Scottish and European Asemblies, things in which he always believed and which will take place not so very long from now. I am no academic, and it will take me a long time to achieve any level of eloquence, but I am determined to stick to John Mackintosh's tradition of political integrity.

I understand that at this stage in a maiden speech it is traditional to make some reference to one's constituency. In the circumstances this is a little superfluous, because practically every hon. Member, for one reason or another, must have been in my constituency during the run-up to the by-election. But so far as I know you, Mr. Deputy Speaker, were not, so I shall refer briefly to the two counties which I now represent.

Berwick and East Lothian is a diverse constituency. It is also a big one. Agriculture, together with its associated services, constitutes our main industry. There are also mining communities, a cement works, a brewery which makes real ale and, largely thanks to the Scottish Development Agency, an increasing amount of light engineering, food processing industries and other small new industries have been brought into many of the communities in the area. Berwick and East Lothian must also be one of the most beautiful constituencies in Britain.

We have the Lammermuir Hills, the Bass Rock, a stretch of the River Tweed and about 100 miles of coastline. It is also unquestionably one of the most politically astute constituencies in the land.

I think that I should now refer to the Gracious Speech because I should hate to be ruled out of order at this stage in my career. I am particularly pleased to be able to contribute to this debate while we are discussing the economy, because that was the main issue in the by-election. I believe that that was an issue on which we won the argument hands down. It would perhaps be churlish of me not to make reference to the fact that the right hon. Member for Sid-cup (Mr. Heath) also did very well in that argument, but then, of course, he was speaking from a position of experience and wisdom which left many Tories in my constituency rather perplexed, to put it mildly.

My constituency is an area of low wages because the bulk of the people work either in agriculture and related industries or in the public sector. It is also an area of high costs because it is a remote, sparsely populated piece of the country which obviously has high distribution costs. I believe that in such an area of low wages and high costs it is imperative that inflation is kept under control. I urge the Government to stick to their guns on their strategy for controlling inflation. Let us have price controls and let us have the guts to stick to the incomes policy. I believe that we as Socialists are seeking to plan the economy and to protect the weak. I cannot see how we can achieve either of those aims if we leave either prices or incomes out of our calculations.

Our incomes policy must be fair for everyone. It must be fair for the low paid and the badly organised as well as for everyone else. It must also be flexible and voluntary, but above all it has to work. The Government can certainly rely on my support in their fight against inflation. Indeed, as one who has perhaps had more recent experience than have most hon. Members of the wishes of the ordinary people of this country I can safely say that the Government have the support of the ordinary people of the whole country and certainly of those in Scotland.

My constituency is predominantly agricultural, and as a farmer I particularly welcome the references in the Gracious Speech to the expansion of home food production and the conservation of tish stocks. I look forward to seeing the detailed proposals on those subjects. If the proposals are effective they are bound to be helpful to all my constituents. Moves to improve home production of food are also bound to be good for the economy of the whole country because they will reduce the level of unnecessary food imports that we face at present.

In passing I express the pious hope that many of our farmers—who are doing extremely well despite protestations to the contrary and who will do even better with the Government's proposed measures —will pass on some of the additional benefits and greater profits that they will receive to the highly skilled but shockingly underpaid workers in agriculture.

The Scottish Development Agency, which I have already mentioned, has contributed a great deal to the restructuring of industry and to the creation and preservation of jobs in Berwick and East Lothian, not only in the bigger towns but in some of the more remote communities. I welcome the proposal in the Gracious Speech to provide additional finance for the SDA. The Agency is doing valuable, positive and constructive work throughout Scotland, especially in places where private investors abdicated their responsibilities a long time ago. The SDA's work must not be curtailed.

I also welcome the announcement today by the Secretary of State for Employment about extending grants to small businesses and service industries. This is bound to be helpful in many parts of the country. My constituency stands to gain a great deal from items of projected public expenditure of one kind or another, not only through the SDA but through local authorities' spending on roads and housing, through the health boards' spending on new hospital buildings and health centres, through the National Coal Board and its workings at Musselburgh, through the South of Scotland Electricity Board with the new Torness power station and through increased pensions for our old people.

The Conservative Party has not yet divulged whether any or all of those schemes will be scrapped under its proposed comprehensive attack on public expenditure. Also, the Scottish National Party has a particularly confusing standpoint on the Torness nuclear power station issue. In Berwickshire and East Lothian the SNP is against the use of nuclear power. In Caithness, where there is already a nuclear power station, the party is in favour of it. In Renfrewshire, where the boilers for power stations are made, the SNP is in favour of nuclear power. It is small wonder that the people do not take that party seriously any more.

I am disappointed at the bigotry being shown by the Scottish National Party. I was listening to a speech the other night from the hon. Member for South Angus (Mr. Welsh). He was making a perfectly valid point about the state of communications and roads to Aberdeen where the oil industry is creating so much activity, but he spoiled the whole effect of it by making out that this was some kind of a sinister conspiracy by the English to do down the Scots. I do not think that anybody takes that seriously any more.

People in Scotland know that Labour's plans for the economy are good for them. They are scared stiff by the Tories plans for a free-for-all. They can see that the SNP is now utterly irrelevant. That, in a nutshell, is why I am here instead of any of my opponents.

The right hon. and learned Member for Surrey, East (Sir G. Howe) made a brave speech at the beginning of the debate, but I must remind him that only two weeks ago today the voters of Berwick and East Lothian—supposedly a marginal seat—gave me the biggest majority that anyone has had in that constituency since the Labour landslide of 1945. On behalf of those voters in my constituency I shall be supporting the Government in the Lobby tonight.

6.36 p.m.

Mr. Donald Stewart (Western Isles)

I pay tribute to the hon. Member for Berwick and East Lothian (Mr. Home Robertson) on his maiden speech. I believe that it also fell to me to follow the hon. Member for Hamilton (Mr. Robertson) when he made his maiden speech. I cannot describe the hon. Gentleman's speech today as non-controversial, but nevertheless it was enjoyable. I am sure that the House welcomed it and will look forward to further contributions from him to enliven our debates.

I thank the hon. Gentleman for his eloquent and well-deserved tribute to his predecessor, John Mackintosh, who was a friend to all of us in all sections of the House. I detected in the hon. Gentleman's speech some suggestion that he is a man of independent mind, like his predecessor. I do not know whether that will be very good news for the Whips. Anyway, he had a signal victory in his by-election which caused great joy in his own party. It is not surprising that that joy is not shared throughout the House, but the whole House will join me in wishing the hon. Gentleman well and thanking him for a felicitous and witty maiden speech.

It would be surprising to have a Gracious Speech which did not contain the promise of certain measures with which one can heartily agree. This Speech is no exception. That is not surprising at a time when we have a minority Government and we are in the last Session before a General Election. It would be impossible for the Government to put through any serious measures of nationalisation. Therefore circumstances dictate that the Gracious Speech should be broadly in favour of "longer holidays and sunnier days".

We in the SNP welcome the promise of a measure to extend benefits for the disabled. I acknowledge that some useful advances have been made in recent years in this respect, but there is still a long way to go. Governments here, whatever their colour, often underestimate the desire of the community to see the disabled, old-age pensioners and people in similar under-privileged categories being properly looked after. People would be willing to sacrifice something to achieve that end, but they must be sure that any increase in contributions will be earmarked and used for such purposes and will not disappear into the Treasury's coffers.

We in the SNP welcome the promised legislation to provide additional finance for the SDA. In view of oil revenues, to which I shall return later, the finance allowed to the SDA so far has been ludicrously inadequate. We have heard noises from the Conservatives about the SDA, and they should tell both the House and Scotland what they will do if they are ever in a position of power.

We support the promise to give full support to strengthening the police service and to ensuring that respect for the law is maintained. We shall give our full backing to such measures.

We welcome the establishment of a system of registration of title to land in Scotland. I hope that this will be an early measure in the Government's programme.

We support fully grants to be made in Wales towards the cost of bilingual education but regret and resent the fact that there is no mention of any similar aid for bilingual education in Scotland. Most Governments accept their responsibility for helping minority cultures, but aid for Gaelic from successive Governments has fallen disgracefully short of what it should be.

We regret also that there is no mention of any means to alleviate the high cost of transport to the Scottish Islands by means of a road-equivalent tariff. This must come, but it is sad that in the meantime the Islands will be existing in the face of these transport burdens.

I turn now to the Scottish economy. On recent occasions I have drawn attention to the figures of Scottish unemployment, which the Government undertook to deal with as a first priority when they came to office in 1974. On 12th October Scottish unemployment was 7.9 per cent., against the United Kingdom figure of 6 per cent. At the end of September the international comparisons were: Scotland 8.1 per pent., United Kingdom 5.8 per cent., and Holland, Belgium, France, Japan and the United States all lower. Even Italy was lower at 7.5 per cent. That is the situation that my hon. Friends and I are determined to correct in so far as it lies within our powers to do so.

Manufacturing industry's share of total employment in Scotland is falling steadily at a time when oil revenues are bringing in fantastic wealth to the Treasury. It is clear that Scotland can expect major improvements in its economy only when oil revenues are invested at home. I am, of course, aware that there have been gloom and doom recently from the oil companies. This is not new. The House will recall similar gloomy forecasts not unconnected with the Oil Taxation Bill, when the oil companies said they could lose interest in the North Sea if taxes were raised.

Although decisions were taken as recently as last year to develop the oilfields, the prospect of an increase in petroleum revenue tax again produced a fit of the blues among the oil companies. We have only to read the recent report about oil sanctions against Rhodesia to realise that not everything the oil companies say can be regarded as gospel.

The SNP has been right all along on the question of oil. We were derided by the Tories when we declared at an early stage that the oil would be worth £800 million. They accused us of gross exaggeration However, as they were busy giving away the licences to the oil companies for peanuts they doubtless thought that they could get away with that sort of approach.

We have been derided by he Labour Party for demanding a more moderate rate of extraction. Our views are now backed by the right hon. Member for Greenock and Port Glasgow (Dr. Mabon), the Minister of State for Energy. In a radio programme on 18th October it was put to him by Mr. Robin Wylie: It's not the case, is it, that too much oil has been extracted too fast and you are having to slow down? The right hon. Gentleman replied: In a way it is. In a way we can see ourselves getting to self-sufficiency in 1980 quite fast, and also getting into a surplus in the eighties quite fast. We are not, therefore, necessarily all that anxious to open up new fields, or, if we are going to open up new fields, it will be at a slower pace than before. I turn for proof of the correctness of the SNP attitude on Scottish oil and gas to the study "The Economic impact of North Sea Oil on Scotland". This report was compiled for the Scottish economic planning department by Professors Gaskin and Mackay, and on page 34 it states: the contributions also make it clear that the contribution of North Sea oil activities to Scottish national income, whilst far from negligible, is not sufficient to transform Scottish living standards or the dominance of the traditional industrial structure. In short, the direct impact of North Sea oil activities, either in terms of employment opportunities or in terms of income generation provides a welcome relief from short-run difficulties rather than a solu- tion to the long-run problems of building a more efficient and prosperous economy. The report ends with striking words on page 99: In other words, North Sea oil and gas have so far done little to transform the industrial base and the long-run economic prospects of the Scottish economy. Nevertheless, they have the potential to do so and this potential rests largely on the use the Central Government will make of oil revenues. The test of Government policy will be whether they can use the breathing space provided to build a more secure foundation for economic prosperity. The evidence of the Government's own economic experts is that so far they have totally failed to do so.

The SNP makes no distinction between the Unionist, Labour and Tory Parties here. They have all failed Scotland in the past. The sad record is there for all to see. My hon. Friends and I came to this House with two objectives. The first was to assist in the beginnings of a Scottish Parliament. As Mr. Neal Ascherson said in The Scotsman, Labour provided the Bill, but the SNP gave the orders. That objective has now been achieved. An Assembly for Scotland is now in the bag. The Scotland Act requires Labour and Conservative Parties to hold a referendum, and both are pledged to hold it in March.

The second objective was to bring maximum pressure to bear on the Government of the day to expand the Scottish economy The Government have totally failed to do that. Our objective must be to give a lead, as we gave a lead before, and to force this Parliament to return to Scotland the oil revenues which have been filched away. The Government took a deliberate decision not to set up an oil fund. Just as the weight of public opinion in Scotland drove them to an Assembly, so it is only a matter of time before the weight of public opinion in Scotland forces them to adopt an oil fund.

As before, the SNP is the only vehicle by which justice will be made available to Scotland. In tonight's Division we shall be voting to begin exerting pressure on United Kingdom Governments to establish a Scottish oil fund and to give Scotland true economic justice at last.

Mr. Dennis Canavan (West Stirling-shire)

I am grateful to the hon Gentleman for giving way. I am sorry. I should have said the right hon. Gentleman. I had forgotten for a moment that he is one of the grateful recipients of the wee bit of English patronage that is going in this place. Is he saying—I gather that he is—that the criterion by which the SNP makes up its mind about how to vote tonight is "What is good for Scotland?" How can the right hon. Gentleman justify that when he knows that in the unlikely event of the Government being defeated tonight he and his hon. Friends will be contributing to that defeat, and that if the Conservatives were returned to power that would lessen the chances of the Scottish Assembly coming about? There would be no guarantee of a Government who would campaign vociferously for a Scottish Assembly in the coming referendum. Does that not prove that the SNP's slogan about it being "good for Scotland" is nothing but a lie, and that It is good for nothing?

Mr. Stewart

I repudiate that suggestion entirely. The Scotland Act binds the Conservative and Labour Parties. It guarantees that there will be a referendum and nothing can turn that back, regardless of what happens tonight.

Our amendment regrets that the Gracious Speech contains no proposals to reduce unemployment in Scotland and fails to implement the main recommendation of the Scottish Office Report…that only the investment of oil revenues within Scotland can bring about any long-term structural improvement in the Scottish economy. That is why my hon. Friends and I will be voting for the Opposition amendment tonight.

6.48 p.m.

Mr. James Sillars (South Ayrshire)

It is not traditional, but I should certainly like to associate myself with the remarks about the maiden speech of my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson). It could not have been easy for him to make a maiden speech after the powerful intervention by the right hon. Member for Down, South (Mr. Powell). I am a great reader of the columns of The Scotsman, and I have noticed that among the whole plethora of letters someone has criticised my hon. Friend as being a wobbly Member of Parliament. That was before we had the privilege of hearing him address this House. I think that everyone will join me in saying that his contribution was far from being a maiden speech by any wobbly Member of Parliament. It was one of great wit and eloquence, and I for one look forward to hearing him again.

One aspect of his speech was ironic. Most hon. Members on the Labour Benches and certainly on the Treasury Bench were elected to Parliament on a programme condemning the policies of the right hon. Member for Sidcup (Mr. Heath). It is an ironic commentary on how far the Labour Party has veered away from the basis of its election victory to hear my hon. Friend praise the right hon. Gentleman's intervention in my hon. Friend's by-election.

This Parliament started with severe criticism of norms and authoritarian attitudes to pay. Anybody who does not believe me should dip into the speeches of my right hon. Friend the Lord President. The early attitudes were by no means accidental. They arose out of the manifesto on which the Labour Party fought the elections of February and October 1974. That manifesto did not say that the idea of free collective bargaining or of workers seeking a good rise from a multinational motor company—one of the richest in the world—was a danger to the national well-being. What the manifesto said in its introduction was: Injustice is the enemy of national unity". At present there are workers who are unemployed in numbers hitherto unprecedented in post-war years. The extent of poverty—I know that some of my hon. Friends will deny this—has increased, not decreased, over the last four years, and also the extent of human unhappiness among working-class people has increased rather than decreased in that period. There is still a great deal of ostentation around to rub home the injustice which four years ago the Labour Party said was the enemy of national unity. While shipyards have shed men and steelworks and pits have closed in areas hitherto prosperous, we all know that there has been no rush of bankruptcies among the owners of five-star hotels.

This Parliament came about because of the promotion of one single basic idea called the social contract. It figured prominently in Labour's election manifesto. This is what it said about the social contract: It is not concerned solely or even primarily with wages. It covers the whole range of national policies. The manifesto goes on to expand its meaning: Labour describes…the firm and detailed commitments which will be fulfilled in the field of social policy, in the fairer sharing of the nation's wealth, in the determination to restore and sustain full employment. The unions in response confirm how they will seek to exercise the newly restored right of free collective bargaining. Therefore, in the grand strategy to regenerate British industry and revitalise economic life wages were properly in-included, because one cannot exclude the consumption power and expenditure patterns of 25 million insured workers. Wages were properly included—but so were all the other crucial factors in the working parts of a modern economy. I refer to pricing, manpower planning, research and development, training, retraining, the spread of wealth, the right to work with its attendant benefits in relaxed attitudes to change and demarcation, planning and the control and direction of investment. They were all inherent in the arguments that led to the compilation of the social contract.

That was all part of a comprehensive attack on the inherent weaknesses of our economy for the Socialist purpose to cause an irreversible shift in the balance of wealth and power to working people and their families. The original social contract rested correctly on the analysis of the inherent weaknesses of the British economy. Between losing office in June 1970 and the resumption of responsibility in February 1974, there was a fundamental debate inside the Labour movement about where it had gone wrong between 1964 and 1970—an analysis of the problems of capitalism moving into a new crisis.

I remember one purple patch upstairs at a meeting of the Parliamentary Labour Party when the present Chancellor of the Exchequer regaled us with an analysis of the problems and crises thrown up by international capitalism. At the end of it all, we emerged with "Labour's Programme for Britain" in 1973 which gave rise to the manifesto which incorporated the social contract. That gave fuller recognition to the post-Empire decline, with its inevitable loss of captive markets, with nothing basically to replace them, the erosion of our resource base by staying east of Suez far too long, the loss of our capital stock by constant massive investment overseas, and the serious lack of any planned strategy for an investment-led recovery.

The result of that internal debate was what was widely recognised as the most Socialist manifesto on which the Labour Party had ever fought an election since 1945. The great tragedy came in July 1975 when we were faced with the inevitable difficulties that always arise at the end of a statutory or non-statutory wages policy, because Labour allowed itself to be panicked by the Treasury into a further round of wages policy. From then on the gift of Socialist analysis which had brought forth the manifesto was put aside. Our Chancellor of the Exchequer swallowed capitalist thinking and practice as a man born to it, namely, that when capitalism is in trouble one blames the working people and attacks their wages —and it is even better if one is in the City of London when the Labour Government are putting their boot into trade unionists.

In four years we have been in full retreat from the platform on which the Labour Party was elected and from the concept of a comprehensive regenerative approach. The results for working people are appalling. Unemployment is at post-war levels but perhaps the major condemnation of the Government on employment lies in the position of our young people. By definition, they are the most dynamic and vital part of our society; they are the most optimistic of our inhabitants and their vision is undimmed and their optimism has not come up against the problems that life inevitably brings. Yet these young people, whom we have encouraged to take part in the education system, and whom we have groomed to take the advantages that can be offered for a good life, are now totally frustrated in the dole queues and on street corners. They are turning sour. Inevitably, there will be social problems and consequences arising out of a deliberate policy to maintain high levels of unemployment.

Perhaps the greatest crime of all that we can level against the Treasury Bench is that it has introduced for the first time ever in the Socialist movement the idea that there is an acceptable level of unemployment.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot)

indicated dissent.

Mr. Sillars

I see that my right hon. Friend disagrees with that statement. I have heard him say ad nauseam that these levels of unemployment are unacceptable, but unemployment has almost doubled since Labour came to office. Therefore, statements to the effect that such levels are unacceptable do not reduce the dole queues.

What Labour has done is to ease the anger which used to emerge from working-class people when unemployment started to rise. When last was there a TUC demonstration of the magnitude we used to see when unemployment was rife? The last demonstration I attended in Scotland was organised by the Scottish TUC. A total of 4,000 of us marched through Glasgow in the morning like a defeated army. On the next occasion that we tried to organise a demonstration against unemployment involving the Clyde confederation, the Scottish TUC and Glasgow trades council we were lucky to see 300 people turn up at the demonstration. That shows how demoralised working-class people have become about unemployment.

When we persuade people collectively to accept high levels of unemployment, we also persuade them collectively to accept a permanently socially submerged section of our society. Each technical leap forward in a modern economy will leave more and more people in the category of permanent uemployment. It will leave them easy prey to people such as the hon. Member for Aberdeen, South (Mr. Sproat). That is the legacy of four years of retreat. The double tragedy is that all these sacrifices have been in vain. I have never understood how one is supposed to promote expansion or create full employment by first creating mass unemployment. That kind of argument is absurd. There has been no fundamental turn-round in the state of the economy of the United Kingdom. Oil has partly saved the day, but only temporarily, be- cause there is more myth than reality surrounding the value of the oil revenues.

Like the right hon. Member for Down, South, I would put my finger on the main problem as being the obsession with wages policy, which has meant that everything else has been taken out of focus. We have become almost sick in the mind about the contribution of wages and apparently cannot understand that other matters are involved in the production of policies for curing, or contributing towards a cure of. economic malaise.

When have we seen in the Labour movement over the past four year the promotion of planning agreements being made compulsory rather than voluntary? When have we seen the arguments about the need to control the flow of capital? Where has there been the same agony as we have seen over wages over the constant loss of our industrial capacity? Because of the obsession with wages policy, the Labour movement has not presented the public with the other factors that matter.

I find it incredible that the obsession with wages policy should continue to possess the minds of Ministers and others. I do not think that there can be any question about the disastrous effects of wages policy, both in diverting attention from other more substantial economic issues and in wreaking havoc in industrial relations.

I should like to take up the point made by the right hon. Gentleman, who spoke about the skill that is employed in industrial negotiations, about how men in the trade union movement come up through a very hard school and learn their craft as they go. When they finally emerge in front of an employer, they are capable of a whole series of very subtle but important judgments valuable in negotiation.

One of the great tragedies about statutory and non-statutory "statutory" wages policies is that we are quickly producing a generation of trade union officials and management who know nothing about negotiations. We are destroying the ability to negotiate.

I give the House an example from my own experience. A couple of years ago I served on an arbitration panel as the teachers' nominee. We were discussing problems in phase 2. We discovered that they arose from the fact that in phase 1 negotiations took exactly 30 seconds. One side came in and said, "It is phase 1 on offer" and the other side said "We shall take it". There was no attempt to analyse the anomalies and the problems that would arise. We discovered later that the problems did arise. The negotiating skill was not there, as it had been previously. We are not training apprentices now in industrial negotiations.

Wages policy is not new. I can recall being caught in the first wages policy trap in 1961, when I was a serving fireman. From then to the present date on and off—more on than off—we have had almost constant wages policy.

The proponents of wages policy cannot claim that it has not worked, by their definition, given that one of their definitions—an important one—is worker acceptability. I have sat here for about eight years and seen three Prime Ministers argue with critics that X million workers have accepted phase 1, phase 2, phase 3 or whatever. For example, last year there were constant arguments between my right hon. Friend the present Prime Minister and my hon. Friend the Member for Bolsover (Mr. Skinner) about who genuinely spoke for the working-class movement. My right hon. Friend would say that X million workers, 11 million in the TUC, had all happily and satisfactorily accepted a particular norm. Therefore, by the Government's own definition, it has worked. If that is so, why has there not been a turn-round in the economy?

Mr. Giles Radice (Chester-le-Street)

Three has.

Mr. Sillars

My hon. Friend says that on the day that the Government have produced a 12½ per cent. minimum lending rate. I shall remember that "There has" in about two months' time, when we meet the next crisis. There has been no fundamental turn-round in the economy. If wages policy was the magic key, it has been put in the door for nearly 17 years, so why has the door not swung open to what the Tories call "lasting prosperity"? We are chasing a holy grail that we shall never get our hands on, while the real world goes in exactly the opposite direction.

We are like the medical men of old. It is not unusual for the orthodox mind at any given point in a society's history to claim that it is absolutely right and to say that it is a lot of nonsense for critics to criticise a certain policy. The proponents of wages policy today are like the medical men of mediaeval times who believed that the main way of solving some problems was to bleed the patient. When he did not get better, they bled him again, and when he died their diagnosis was that whatever else he died of it was certainly not bleeding. It is the same with the proponents of wages policy today. They say that whatever else the British economy ails of it is not the repetitive dose of wages policy. I disagree.

My right hon. and hon. Friends have tried Heathism and monetarism. I believe that it is time for them to try a fair degree of Socialism.

Finally, I want to speak about the position of the Scottish National Party. When the right hon. Member for Down, South finally told us the exact position about the vote tonight, I did not look at the Government Front Bench to see how the Whips were reacting. I looked at those on the SNP Bench, and I was not at all surprised to see more than a ripple of relief spread among them. It would have been a laugh if tonight at ten o'clock, as in the First World War, everyone had mobilised for something he did not want and finally got it.

I do not think that anyone here, or certainly inside Scotland, is unaware of the tactics of the SNP, which wants to keep this Labour Government in office for a period yet, but whose Members nevertheless want to go back to what they believe are basically Conservative constituencies and say "We have clean hands. We voted against the Government. Do not blame us ", and then add sotto voce "Thank God for the Ulster Unionists."

I stand open to correction on this, but I think that the following is a fair point. Twice in recent Scottish political history two groups have come from Scotland to Westminster with a fund of good will drawn from almost the whole of Scotland, including many who did not vote for them. The first group was the Clydesiders, and they proved worth sending. The quality of their speeches, the clarity of their thought and ideas, and the purposeful,

principled action that they took, based on a clear strategy, made them and all that they stood for renowned in every part of the United Kingdom and well outside its boundaries. They did not achieve all that they came to achieve, but they laid a foundation for considerable advance and were an inspiration for generations to come.

The second group was the SNP, which came in February 1974 billed as "The Magnificent Seven" and then in October 1974 as Scotland's team. I can only conclude that that is the lot that Ally McLeod played in Argentina. I think that it is fair to say that those SNP Members carried a great deal of good will from people in Scotland. I remember a woman in my constituency telling me that, although she had voted for me and the Labour Party, she was nevertheless delighted that SNP Members were here in a group, because she thought that that would be, to quote that interesting phrase, "good for Scotland".

The fact is that when we examine their performance we see that the SNP Members have never won a debate or an argument, even when the facts were on their side. They are renowned for one significant action here in regard to the working class in the West of Scotland—tearing up telegrams from Scottish shipyard workers and workers in Scottish Aviation at Prestwick. They are also renowned for voting against public ownership.

I can recall that when I addressed Clydeside shipyard workers at Yarrow's yard during the Garscadden by-election I said that I was not there to attack the SNP candidate, Keith Bovey, for his pacifism. In West Scotland pacifism is a most honourable tradition. All the men nodded. I said "I am here to attack him and his parliamentary group for their vote in relation to the public ownership of shipbuilding, which we do not say guarantees your job but guarantees the ability to bring your pressure to bear on the people who will decide about your job."

Throughout the last four years that SNP Members have sat in this House they have lacked cohesion and strategy and they are—as they have shown themselves to be today, and there will be problems when they go back to Scotland at the weekend—hopeless tacticians.

The right hon. Gentleman the leader of the SNP says that he judges things on the basis of "good for Scotland." He has demanded certain guarantees from the Government. I say in relation to my right hon. Friend the Minister of State. Privy Council Office, that I have found him to be most receptive to the ideas that we have put to him for the Government engaging, quite properly, in the referendum within declared Government policy.

What about the Conservative Party? The political reality is that if there is an election on 6th December, we shall have either a Tory Government or a Labour Government. What guarantees has the right hon. Gentleman sought from the Tories in the time up until now about the Scottish Assembly? It is not enough to say that they will have a referendum. There is a mighty difference between having a Government who favour an Act and having a Government who disfavour that Act and who will actively campaign against it.

Mr. Gordon Wilson (Dundee, East)

I can quite imagine the hon. Gentleman's interest in the SNP, as he is speaking as a leader without a party and is probably quite desperate to find some followers somewhere and is having great difficulty. However, does he not accept that within the Labour Party there is a very substantial number of people against a Scottish Assembly, and they will vote against it and do nothing to help it? Equally within the Conservative Party, which will be campaigning against it, some people will be voting for it.

In those circumstances, bearing in mind that the Government have refused to commit any resources in response to the hon. Gentleman's request or, indeed, even to issue a leaflet of explanation, as was done prior to the EEC referendum, why is he taking such a supine view? Is it really the case that he is desperately afraid of losing his seat in a by-election?

Mr. Sillars

I would rather be in my party with no members than be a member of the hon. Gentleman's party. But I will take the hon. Gentleman up on a point. Nobody is better able or more proper to intervene than the hon. Gentleman, because in the very last debate that we had in this House on the Scotland Act, or the Scotland Bill at that time, he and I were in the Chamber along with my right hon. Friends and the hon. Member for Glasgow, Cathcart (Mr. Taylor), when the Tory Front Bench spokesman was asked to declare whether the Tories would not use the power of the Government machine to campaign if they were the Government before the referendum took place. The hon. Gentleman will remember very clearly that in no way did they give that commitment.

I refer the hon. Gentleman to the speech of his hon. Friend the Member for Dunbartonshire, East (Mrs. Bain) earlier in our debate on the Address. One of her most bitter complaints was against the hon. Member for Cathcart on Radio Clyde, in "Clyde Comment", when she claimed that he did nothing but waffle while he was put on the spot in relation to what a Conservative Government would do. What guarantees has the hon. Gentleman got from the Tories?

What guarantees has the leader of the SNP got from the Tories in relation to the function of the Scottish Development Agency and the level of its budget? The SNP has been complaining about the Conservative Party not spelling out in detail how it would cut public expenditure. I am not asking the Conservative Party. I am asking the right hon. Gentleman whether he asked the Conservative Party and if he got a satisfactory answer which would meet the test, "Is it good for Scotland?"

The right hon. Gentleman is in a bit of difficulty. That is understandable. It was not in his prepared notes.

Let us move ahead to the other two much more major issues, from the SNP point of view, and they are oil and independence. That is what the right hon. Gentleman came here in relation to—not an Assembly, but independence. I checked the manifesto yesterday. Will it be easier or more difficult to extract from Westminster at least a share of that oil, with or without an Assembly? If there is a Tory Government here, there is no chance of that happening, especially if we have no Assembly north of the border. If we have an Assembly north of the border, for the first time in Scotland's history the people of Scotland will have an institution through which they can come and talk to Westminster not in a partisan, party-political sense but in an institutional sense, with the Scottish Administration meeting the British Administration, putting together and placing before the latter a comprehensive case for a share of the oil based on justice.

I would think that tactically, indeed strategically—

Mr. Gordon Wilson

The hon. Gentleman is living in cloud-cuckoo-land.

Mr. Sillars

Well, the hon. Gentleman has actually got to argue with me that if the Conservative Party came into office and there was no Assembly that would mean oil for Scotland and would bring independence much more quickly than seems to be the case at the moment.

I believe that the SNP is absolutely cynical about the vote tonight. I do not think that at the end of the day anything will save SNP Members from the consequences of their own folly. One must go back a very considerable period in the history of Scotland to find the Scottish people so badly served by a group of self-appointed generals. The only time that I can think of is Flodden. The best description of the Scottish National Party is that if they had been in charge at Flodden we Scots would have lost even if the English Army had been on our side.

Several Hon. Members

rose—

Mr. Deputy Speaker (Sir Myer Galpern)

Order. In the interests of the 17 hon. Members who are anxious to take part in the debate in the two hours, roughly, remaining, I feel compelled to say that some brevity should be exercised. If we have half-hour speeches we shall be able to fit in only four speakers during the rest of the evening before the winding-up speeches. Hon. Members should try to accommodate each other by being as brief as possible.

7.17 p.m.

Mr. John Pardoe (Cornwall, North)

It is nice to break the Scottish run and almost a Scottish monopoly. Nevertheless, although it is not actual tradition, I, too, pay my respects and offer my congratulations to the hon. Member for Berwick and East Lothian (Mr. Home Robertson) on his delightful and witty maiden speech. I hope that he will be with us for a long time and will make many such amusing speeches in the House.

I shall follow the arguments of the hon. Member for South Ayrshire (Mr. Sillars) in a moment when I come to deal with the question of pay policy. However, although this is primarily an economic debate, I want to deal first with what is essentially a political matter, and that is the vote tonight.

Some surprise seems to have been expressed in certain quarters, some on the Labour Benches and some even in the always correct British press, that the Liberal Party should be going to vote against the Government tonight. The starting point, I suppose, is a curious article which appeared in The Guardian yesterday by Mr. Ian Aitken, for whom I normally have great respect. On this occasion he wrote a load of rubbish. He said: Thanks to some skilful tactical footwork by Mrs. Thatcher, the 13 Liberal MPs seem certain to be forced to join the Conservatives after all in the Division Lobbies. He went on to say: Tempted by Mr. David Steel's weekend declaration that the Liberal Party would not vote in favour of Tory economic policies but would have been ready to vote for an early general election, Mrs. Thatcher and her Shadow Cabinet colleagues sensibly decided to put the Liberal Party to the test. As soon as the amendment went down Liberal MPs were in no doubt that they had been out-manoeuvered. That really is standing the argument completely on its head. The fact is that there has never been any doubt in my mind or in the minds of all but one of my colleagues that we would be voting against the Government at the end of these days of debate on the Queen's Speech.

My right hon. Friend the leader of the Liberal Party has made it clear that as we ended the agreement with the Government in the summer we believe that a General Election is now appropriate and timely. Of course we were not going to say that we would be voting against the Queen's Speech willy-nilly whatever was in it, any more than the official Opposition would say that. That would be a ridiculous stance to take. We have said on several occasions—I have said it myself and my right hon. Friend the Mem- ber for Roxburgh, Selkirk and Peebles (Mr. Steel) has said it—that it would be hard to imagine a Queen's Speech that would persuade us that it was in the national interest to postpone a General Election any longer.

That is a reasonable formula. Anyone, even those in the press, should be able to understand it. It means that we shall vote for a General Election. That is what we shall do today. Our problem on this occasion, as on others, is that, unfortunately, there are only two Lobbies. That is a great disaster in terms of parliamentary democracy. However, that is with us and we can do little about it. Votes are always seen by the press and the two party dinosaurs in the House as either for the Government or for the Conservatives. We do not accept that grotesque limitation of choice. We realised that the amendment on which the vote would take place would be crucial. Having announced our intention to vote for a General Election, we had to ensure that the amendment enabled us to do so.

The vote at the end of the Queen's Speech debate is bound to be on an amendment tabled by the Official Opposition. That is another of the disasters in this place. That is another indication that the House is ruled by dinosaurs. We were somewhat afraid that the Conservative Opposition would bungle the amendment. We tabled our own amendment not because we thought that it would be selected—we knew that it would not—but to give hints to those who needed them. My right hon. Friend followed that up by a weekend speech in which he told the Conservative leadership what to write or, more importantly, what not to write. Never have so many hints been dropped.

Even the brain of the dinosaur proved capable of absorbing some sensation. The Opposition amendment reads as though it was written by someone who had our amendment on his desk. It does not call upon the House to support a lot of old Tory rubbish. If it had, it would have been impossible for us to vote for it. It does not even ask for the return of a Tory Administration. O, modesty!

The vote tonight is for a General Election. It is not a vote for a Conservative Government. It is certainly not a vote for Conservative policies. It is a vote for a General Election, when all parties in the House and all politicians may put their respective policies before the British people and let them decide. That has always been our intention, and I do not know why there should have been any doubt about it.

At the beginning of the debate the right hon. Lady the Leader of the Opposition made an extremely important speech about Conservative attitudes to incomes policy. I shall take up one or two of her remarks. She said: All Governments from time to time have had incomes policies". The right hon. Lady listed the dates. I fundamentally disagree with her. Britain has never had an incomes policy. It has had a series of incomes freezes at temperatures rather less than freezing. In other words, we have had a series of nil-plus-something norms. If we say that a freeze is at zero, zero plus one is a freeze rather than an incomes policy. We have not had an incomes policy from any Government.

The right hon. Lady was right to attack a rigid national norm. She accepted that any Government had to take a view of the general level of wage settlements commensurate with the projected growth rate. She said: The dispute arises, I think, over whether that view is an average or whether it becomes a norm. I must say very strongly indeed that in our view that figure is an average and can never be a norm except in conditions of emergency. The right hon. Member for Down, South (Mr. Powell) has had some fun with that. I am not surprised. It is pretty easy to have fun with it. However, without a sophisticated pay policy it is impossible to distinguish between a norm and an average. Having taken a view about a desirable average, how will a Conservative Government go about achieving it? If that is not to be done by making it a norm, who will decide who is to have more than the average and who is to have less?

Having picked up what might have been an extremely interesting piece of speculation, the right hon. Lady dropped it like a hot brick. Instead of following it through and declaring what sort of incomes policy would enable a Conservative Government to distinguish between the two factors and impose some sort of average on the country, she reintroduced the dreaded cure-all of responsible collective bargaining.

Speaking of the breakdown of the Conservative Government's pay policy—she called it a breakdown, I did not—she said: It broke because after one has had a certain number of rigid phases, one must in fact return to responsible collective bargaining. Was not the reason for the rigid phases of pay policy that she was castigating the fact that responsible collective bargaining had broken down? All Governments tried responsible collective bargaining, and under all Governments responsible collective bargaining broke down and failed. It was only when responsible collective bargaining failed that Governments turned to some form of rigid pay policy.

The right hon. Lady says that the reason for the return to responsible collective bargaining is that rigid phases of pay policy have broken down. Where does that lead us? It seems that we can have neither rigid pay policy nor collective bargaining. It may be that I have the right hon. Lady's argument slightly wrong. It may be that she believes that the trouble with the collective bargaining that we had in the past was that it was not responsible. That begs a vital question about the three words "responsible collective bargaining" Who will decide what is responsible? If the Government make a decision, they become as firmly entrenched in pay policy under the right hon. Lady's proposals as ever they have been.

The right hon. Lady referred to one fundamental factor, namely, the effect of the monopoly power in the labour market. On 1st November she referred to whether trade unions have so much power that they will abuse that power."—[Official Report, 1st November 1978, Vol. 957, c. 27–30.] She said that the Prime Minister should be addressing himself to that issue, but so should she; so should we all. Some of us have been addressing ourselves to it for many years. The only conclusion that we can draw is that most of our modern inflation has been caused by the interaction of two factors. There is the Keynesian commitment to full employment, which I wholeheartedly share, and there is the monopoly bargaining power of trade unions, which has increased enormously in Britain.

The right hon. Member for Down, South made a sophisticated, argumentative and seemingly logical speech. I remind hon. Members on the Left wing of the Labour Party, whose heads were nodding so vigorously throughout that splendid deployment of the argument, that the right hon. Gentleman's argument on immigration controls sounds just as logical in his mouth. It is extremely dangerous to be led along these subterranean logicians' paths by the right hon. Gentleman. The fact is that today the right hon. Gentleman was virtually denying that monopoly power in any market can ever have any effect on prices. That is a nonsensical conclusion at which to arrive.

In the long term we must reduce the monopoly bargaining power of trade unions. We cannot do that by measures such as the Industrial Relations Act. That measure would have centralised trade union power. That was its purpose. Its aim was to give more of the power to the hierarchies in the trade unions and less to the shop floor. We can tackle the problem of monopoly bargaining power only by diffusing power to the shop floor by means of a radical change to industrial democracy at plant level. That will take time, and meanwhile we shall have to continue to control the price that monopoly suppliers of labour can charge through an incomes policy. That means an incomes policy that will last not from year to year, but for at least five years. Such a policy must be flexible but enforceable.

That can be done only by having regard to the labour force's share of the wealth which the enterprise in which they work creates. I get a bit sick of hearing trade union negotiators at Ford saying that the company can afford to pay because the company has made profits. I dare suggest that never at any time in the negotiations over the years have the trade union negotiators on behalf of the Ford workers asked the company seriously for a profit-sharing scheme, yet as a result of the Finance Act 1978 they could, if they put pressure on the Ford company, ensure that every member of the Ford labour force could have up to £500 a year this year, tax-free, in the form of shares in the company. They would have real assets in the company and a share of the wealth, which I believe some Labour Members want. But the trade union negotiators have never asked for that. Of course the Ford company will not give away its American wealth in that way to mere British workers, but I believe that if the trade unions were to negotiate for it that they could get it and solve a large number of their problems.

We need a pay policy based on the principle that for a five-year period labour costs must stay constant as a proportion of the added value of the enterprise. That cannot be inflationary. If its added value increases its labour costs can increase. Where an enterprise increases its labour costs as a percentage of added value it and its employees must incur a penalty, and the best penalty, in our view, is an increased tax burden on the individual firm and its employees.

I know that many Members on both sides of the House will disagree fundamentally with that kind of argument, but many of those who disagree with that sort of pay policy believe in what they call incomes policy. It is up to them to come up with a flexible but enforceable incomes policy, because that is what everybody in this House who believes in incomes policy is trying to find.

I do not believe that we can do without pay policy. The right hon. and learned Member for Surrey, East (Sir G. Howe) played with words this afternoon when he said that he was in favour of something called a policy for pay. I do not know how a policy for pay differs from a pay policy. I think that it is just a question of rearranging the words to make it sound a little less awful to some of the monetarists behind him. The question is not whether we have incomes restraint, but what kind of incomes restraint we have. The Government are now incapable of devising, or are unwilling to devise, an effective pay policy. That is one good reason for having a General Election as soon as possible.

The Government are also incapable of coming to a decision on the European monetary system, and again we are in great danger of missing the European bus. We have had to go into Europe cap in hand—a Europe fashioned by other hands long before we got there and long before we were able to influence its shape. If we are not very careful we shall be the only EEC country which will be so weak and have so infirm an economy that we shall not dare to put our feet into the European monetary system. Have we really reached the stage where we cannot go even where Italy dares to tread? Is that what the Government have brought us to?

Mr. Russell Fairgrieve (Aberdeenshire, West)

Yes.

Mr. Pardoe

This is a nonsensical argument. The fact is that there are technical arguments one way and the other about European monetary stability. We can enter into all those arguments, but the basic political imperative is that we must be there in shaping the future institutions of Europe, just as we should have been there in shaping the foundations of Europe. It is a tragedy that we were not there, and it will be even more of a tragedy if we are not there shaping the European monetary system in the future. The reason that the Labour Government cannot come to a conclusion on this is that they are bargaining from the weakness of a total and utter split within the Cabinet over the very first principles of European policy.

The immediate economic outlook has not been improved in the mind of any of us by the action of the Bank of England and the Treasury today on interest rates. Three months ago it seemed that the world's view of Britain had changed for the better. There was certainly a new confidence about. The Prime Minister was even heard to claim that somehow his great contribution to Britain was that he had made this country governable again. That has all changed. One of the most worrying things in recent weeks when talking to investment analysts, business men and bankers from abroad has been to hear them ask "What has happened to Britain?" They refer to the strikes and to the excessive wage increases.

Who will say that the Ford claim is responsible? Does it appear responsible to the Conservative leader? What about the bakers' claim? The cost of bread has gone up by 23 per cent. since the beginning of this year and the workers are now asking for a 26 per cent. increase in wages. It is a totally irresponsible claim by any standards and it must not be allowed to go through, but what will the Government do about it?

Mr. Tom Litterick (Birmingham, Selly Oak)

I am glad that the hon. Gentleman mentioned bread prices. We know that the world has had two successive bumper grain crops. We know that the basic prices of producing bread have fallen to rock bottom. We also know that the price of bread in the shops will not fall. That has nothing to do with wages. I suggest to the hon. Member that it is irresponsible even to suggest that it has anything to do with wages. It has to do with the kinds of market mechanisms that the world's people have to face.

Mr. Pardoe

It has everything to do with monopoly. The major part of the bread industry in this country is now in the hands of two companies and the union has the labour side tied up. Where capitalists and union are working a monopoly together they are able to squeeze the last ounce out of the consumer, and that is what is happening in the bread market. It has to do with wages, but it has to do primarily with the monopoly—

Mr. Litterick

No.

Mr. Pardoe

—in the bread market. It is a question of the power that collusive monopoly gives to a trade union, as in the case of this particular trade union. It is that which has enabled the prices to be raised.

Mr. Roy Hughes (Newport)

The hon. Gentleman has talked about the trade unions squeezing the orange dry. The trade unions do not seem to have been squeezing very hard in this case, as I think the hon. Gentleman will agree, because the workers in the industry get only £41 for a 40-hour week.

Mr. Pardoe

It is a pity that some Labour Members have not read a letter that was written by a rather better Socialist, Frank Field of the Child Poverty Action Group, in The Guardian yesterday. Talking of the sorts of increases now being claimed by, for instance, the printers on The Times and the Ford workers, he went on to say: These are just some of the differences in rewards which result from free collective bargaining. Free collective bargaining, however responsible, does not help the agricultural workers, the nurses or the millions of other low paid workers who are not covered by trade unions. Moreover, they are witnessing a determined attempt by the powerful unions to break incomes policy. That is as good a Socialist view as any that will come from the Labour Benches.

Mr. Norman Atkinson (Tottenham)

What did he say about the bakers?

Mr. Pardoe

The man whose main responsibility is to look after the interests of the low paid in Britain believes that free collective bargaining is one of his worst enemies, and one of the worst enemies of the low paid. So it is.

The virtual collapse of pay policy that we are now witnessing and the obvious inability of a lame-duck Government to do anything about it are in my view good enough reasons for holding a General Election. The sooner we hold it, the better.

7.40 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

In view of your request to limit our remarks, Mr. Deputy Speaker. I shall try to be as brief as possible. I make one comment on the speech of the hon. Member for Cornwall, North (Mr. Pardoe). We have been here before. It is rather like a nightmare which returns every two or three years. Each time it comes back it is more intense than it was on the previous occasion. The interesting thing about the low paid is that every time we have an incomes policy we are told that it is necessary to help the low paid. Yet at the end of each incomes policy we discover that the low paid are still the low paid. They are still at the bottom of the pile. Their position is worse than it was before. I remind the House that low pay does not stop being low pay because of an incomes policy.

Look at what happened to the former Leader of the Tory Party, the right hon. Member for Sidcup (Mr. Heath), who occupies—when he is here—the Bench below the Gangway. Let us look at what happened in 1973, after periods of statutory incomes policy. We did not introduce a statutory incomes policy. Well, we did and we did not. It was and was not. The truth is that it has been an incomes policy for three years and it is remarkable that the trade union movement has been willing to go along with it for that time. However, the unions have now said quite categorically that they are at the end of the road.

The other day the Prime Minister said that 5 per cent. was the Government's policy and that they were not moving from it—rather like King Canute as he went beneath the waves. Yet today he says that there is to be free collective bargaining. That is the case. The trade unions are no longer prepared to accept an incomes policy of the type we have had, or to accept a 5 per cent. norm. The Labour Party is not prepared to accept that either.

My hon. Friend for South Ayrshire, (Mr. Sillars) made an absolutely marvellous speech, particularly his devastating remarks about the Scottish National Party. I hope that every one of those remarks is reported back in Scotland. I particularly like the reference he made to the battle of Flodden, when he said that the Scottish nationalists would not have won even if the English had been on their side. I am not surprised that this is the view taken by himself and others in Scotland.

My hon. Friend is quite wrong on one point. He talked about the retreat of the Labour Party. I would like to make it quite clear that the Labour Party has not retreated. We have not gone back on our manifesto. The Labour Party has been having a discussion with its right hon. and hon. Friends who make up the Labour Government. The Labour Party is not entirely the Labour Government. It is not exactly the same thing. The Labour Party conference passed a resolution calling for an end to incomes policy, to any suggestion of a 5 per cent. norm. Let us be clear. It is not the Labour Party which has retreated; it is my right hon. and hon. Friends on the Front Bench who have tended to depart from some of their policies.

A great deal of our manifesto has been carried through and this has been beneficial for the ordinary working people. I am not ashamed of any of the progressive measures that have been enacted by the Government, supported by the Labour Party. We may, however, have objected to certain policies when there has been a retreat on the part of my right hon. and hon. Friends. We are at the end of the road for the incomes policy. That does not mean that we line up with the Leader of the Opposition or the right hon. Member for Down, South (Mr. Powell). Although one or two of us may have nodded on the odd occasions when the right hon. Gentleman said something about the role of trade unions and trade union officials, we are not accepting the monetarist concept. We do not believe that the answer to our problem is to produce a squeeze, which is bound to create unemployment. That is likely to happen on the right hon. Gentleman's arguments as much as it is if the Opposition's policies were followed.

My right hon. and hon. Friends have to recognise that if we are to make any further progress there cannot be this 5 per cent. figure, like some phallic symbol, as if it were a test of manhood. It is as though we had to prove ourselves. That is not good enough. People will not accept this. It is creating an artificial barrier through which they are bound to break. This is happening and my right hon. Friend does not seem to realise it. Workers are settling above 5 per cent. It is true that my right hon. Friend boasts of those who have settled below 5 per cent. but a lot of others are settling above that figure. The policy is now as dead as the dodo. That ought to be recognised.

If the Government want to concentrate on a wages policy they should concentrate upon something decided by the Labour Party conference, namely, the introduction of minimum national wage legislation. That is the Labour Party's policy, carried at our conference. That is the only thing that we have argued. Beyond that there should be free collective bargaining, based upon the arguments which trade union officials are able to put up and the strength of the workers in relation to their industries.

We were told that, without an incomes policy, there would be an increase in unemployment. The truth is that we have had incomes policies and an increase in unemployment. Some of us said that an incomes policy would not prevent unemployment because unemployment is inherent in the capitalist system. I agree with my hon. Friend the Member for South Ayrshire. The way to deal with unemployment is to carry through Socialist policies. I do not agree with him if he believes that we can carry out such policies in isolation.

We cannot have a nice Socialist Utopia in Britain and nowhere else in the world. That will not work. Whether we like it or not, we are subject to market forces throughout the world. In all of the countries of the Western world controlled by market forces unemployment is high. This is true of all the Western capitalist world. There is no isolated planning of our resources and of the economy in a Socialist direction. We have to move in a Socialist direction, but we must not delude ourselves that we can do so in total isolation.

I will be brief because I know that many of my hon. Friends wish to speak. I had a nicely written-out speech, which I fear would have lasted at least 20 minutes, possibly half an hour. I want now to direct my remarks to my right hon. Friends A small group of people meeting in Downing Street round a table is not necessarily correct about everything. Those people might be correct about many things, but not necessarily all.

My hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) made an excellent maiden speech in the tradition of the late John Mackintosh. Incidentally, it was politically on much the same lines. I liked John Mackintosh very much. My hon. Friend said that the Government's policies led to his victory at Berwick. We had just had the Labour Party conference at which there had been a good old dust-up and differences of opinion between the Front Bench and members of the Labour Party. Therefore, it could also be argued with much the same justification that the debate on wages at the Labour Party conference was responsible for our victory at Berwick.

The debate at the Labour Party conference was serious. People there were trying to get to grips with inflation, but with different approaches to how it should be solved. I think that the British people welcomed that serious debate rather than the "phoney" debates that take place at the Tory Party conference.

Mr. Max Madden (Sowerby)

What about the Liberal Party conference?

Mr. Heffer

I do not watch the Liberal Party conference, so I do not know what goes on there.

Mr. Madden

It is a good show.

Mr. Heffer

I take my hon. Friend's word for that. Perhaps next time I shall look at it.

The TUC is opposed to the continuation of an incomes policy—particularly the 5 per cent. It wants a return to free collective bargaining. The Labour Party conference was equally opposed to it. Let no one believe for a moment that those delegates who voted were only those with block votes in their pockets. The constituency parties voted by an absolutely overwhelming majority in favour of getting rid of the 5 per cent. I watched the original vote. People try to twist things the way that they see them, but I was watching that vote from the platform. A card vote was called for, and that completely consolidated it.

The British people are fully aware of the Labour Party's stance on incomes policy. I ask my hon. Friends not to be like King Canute. They must not pretend that they can stop the waves from coming in. The waves are not only coming in, but they will overwhelm them.

It is nice being popular on the question of wages no strikes are taking place, when bread is regularly available, when the lights are on and when the trains are running. It is marvellous. The right hon. Member for Sidcup was popular until things began to happen and people got stuck in lifts, the bins were not emptied and the trains did not run. Are we to have a winter of discontent similar to that?

Some of the anger of the people will be turned on trade unionists—it always is—but a great deal of that anger will also be turned on the Labour Government. People will ask "Why did you not act more flexibly? Why did you put up the barrier? Why were you acting in this way, particularly in relation to public services, sewage, water?"

I suggest that we can breathe a little easier tonight and that, as we shall continue in office for a period, there is time to deal with this matter before it is too late. I appeal to my hon. Friends to consider the decisions of the Labour Party and the TUC. They should not believe that 12 or so people in Downing Street know best. Perhaps the Labour movement knows better than they do when it comes-to incomes policy.

7.55 p.m.

Mr. Russell Fairgrieve (Aberdeenshire, West)

When we consider what has happened to the British economy over the last four years and then look at our industrial competitors in Western Europe, as well as the position in Japan and America, we are entitled to criticism this Government's handling of our economy. Without going into all the details of productivity, we know that, by any measurement. we are not as efficient as these countries and it is now affecting the standard of living of all our people.

It does not matter whether we take the number of people needed to produce a car in West Germany or the number of hours it takes to produce a television set in Japan, the message is always the same—productivity in Britain is lower. As a result, our standard of living is now lower.

In Western Europe, the working population have better pensions, better benefits, higher wages and shorter hours, and the gap is still widening.

If this is happening under our present policies, surely we should change them. It has never been my habit to mount only a destructive case, but I believe that even this Government should face up to some radical changes. These changes must be in taxation, wage policies and industrial strategy.

It is quite ridiculous that in this country, with our huge unemployment problem, we should have tens of thousands of vacancies for skilled people in, for example, electronics and engineering. But is this not understandable when people can receive virtually as much take-home pay for being under-employed and over-manned in an unskilled job as they would get after years of training to make themselves proficient in skilled careers?

Again, whilst it is absolutely vital that those who are out of work, through no fault of their own, suffer no hardship to their families or themselves, surely the gap between that position and the lowest wage earners should be wider.

All industrial history shows that to preserve jobs in industries where the demand for the products has changed may for a short time help employment, but in the long term destroys it. Our competitors seize upon every technological advance because they know that this makes the product cheaper, therefore available to a much larger market, and so the eventual result is more people employed in the industry concerned.

Here the attempt to introduce new technology more often than not leads to manning disputes; attempts are made to retain a higher than necessary work force; productivity drops and the product becomes too expensive for a wider market, with the inevitable consequence of higher unemployment and lower wages for those retained to work the new technology inefficiently.

I see that the chairman of the TUC has now suggested that price rises, not wage rises, are the cause of inflation. How is it possible to hold prices unless every increase in wages is accompanied by better productivity? For how long can a country award itself an annual wage increase without an annual productivity increase?

Again, on taxation, there must be a cutting of rates at all levels and there should be some adjustment between direct and indirect taxation. It is far better, and it gives people far more incentive, to tax spending than to tax earning, and this is what a shift from direct to indirect taxation means.

On the problem of wages, which is currently causing areas of disagreement in both political parties, may I say that some day, somehow, there must be a return to responsible free collective bargaining in industry. If that is agreed and can be accepted by the whole population in the long-term interests of this country, then how should the start be made?

To make this start means moderation in large sectors of earnings so that a start can be made to get real wages and differentials up in other sectors, which can then become the expanding high fliers which will eventually haul up everybody's standard of living in their wake. I suggest that the place to start is in productive manufacturing and particularly exporting industry, which is the area which gives the nation its standard of living. This of course means Government responsibility to hold wage increases at a lower overall level in all those sectors where basically the job is administrative. service and governmental.

I end by saying that the measures that I have outlined should be accompanied by movements to start reducing Government expenditure of the GNP from its present 60 per cent. towards 40 per cent. This can be done by putting large parts of the public sector over to more efficient private management. Besides raising the income level at which taxation begins, a start should be made on reducing the present top rate on earned incomes of 80 per cent. towards 60 per cent. The present legislation and bureaucracy should be pruned and savaged to allow enter-price and initiative to flourish and there should be introduced immediately exemptions to many provisions of the destructive Employment Protection Act to firms employing below a certain work force and with turnover below a certain level.

To those who disagree with what I see as ways of making a start on getting the standard of living of the British people catching up with that of our friends across the Channel I would say let them spell out clearly other methods of doing so.

8.1 p.m.

Mr. Giles Radice (Chester-le-Street)

I congratulate my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) on his outstanding maiden speech and join in his tribute to John Mackintosh, whose eloquence, integrity and courage were an example to many of us. For me at any rate he was one of the outstanding Members of this House.

The trouble with the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe) was that it was in two parts and that those two parts did not hang together. First, he criticised the Government for interfering in collective bargaining and then spent a great deal of time telling the unions how to run themselves. He said little that was positive about Tory policy, except that the Tories would brandish guidelines —I think that that is the phrase he used —which was stirring stuff and will, I am sure, bring his party many votes.

I, too, want to discuss incomes policy, which, as the hon. Member for Aberdeenshire, West (Mr. Fairgrieve) said, divides both parties. I do not underrate the problems caused by incomes policies, particularly in their fourth stage. There are arguments over anomalies and differentials and the distortions which they can create in the labour market. There are the problems created for unions by shop stewards who want to go back to what they see, understandably, as their main function of bargaining about pay.

All this causes considerable difficulty, although I do not accept the argument of the right hon. Member for Down, South (Mr. Powell) that the reason for our industrial relations problems being always highlighted is incomes policy. That is far too simplified an explanation, but I agree that incomes policy causes many difficulties.

Despite those difficulties, however, having looked at the matter for many years, I do not see that there is any alternative. Of course there are many causes of inflation—the price of raw materials, the pricing policies of particular companies and industries and the actions of Government, including taxation policy and control of the money supply; and, as we have seen over the last few years, changes in the international money markets are often beyond our control and have an important effect on prices in this country.

All these factors have to be taken into account in the formulation of policy, but I do not see how one can dismiss pay from price determination, considering all the evidence that we have had, particularly in 1974–75. I can still vividly remember Hugh Scanlon, one of the great supporters of unrestrained collective bargaining, saying, "I looked over the abyss and I did not like what I saw." We should remember what happened in those years before we extol the virtues of unrestrained collective bargaining.

Of course it would be possible, as the Prime Minister has said, for us completely to abandon any form of incomes policy and to rely on fiscal and monetary controls, but in the end that would almost certainly mean much higher unemployment and would certainly be at the expense of growth. The beauty of incomes policy is that it enables one to combine policies for reducing inflation with policies for reducing unemployment. One cannot do that with unrestrained collective bargaining.

In any case, the phrase is a bit of a myth. When a third of all employees are working, in some form or another, in the public sector, the Government will have to take a view about their pay. Whether one likes it or not, that is one of the facts of life.

I can understand the free market supporters of the Conservative Party being in favour of this kind of bargaining. What I fail to understand and would genuinely like to know is how some of my colleagues who are good Socialists can still believe in the merits of unrestrained collective bargaining. I ask them, what about the impact on fellow workers? What about fellow workers' jobs? What about fellow workers' living standards? What about low pay? It is unrestrained collective bargaining which has to take the major share of the blame for the existence of low pay. What has created the differentials over the years but unrestrained collective bargaining? As Sid Weighell said at the Labour Party conference—

Mr. Litterick

He is a great authority.

Mr. Radice

He is certainly a great authority. As he said, under free collective bargaining, those with the biggest snouts get the biggest share. I do not happen to believe that is a very good Socialist policy.

Mr. Litterick

Is my hon. Friend seriously suggesting that there was no low pay until there was collective bargaining? He must face the logic of his own arguments. If he is asserting that low pay—

Mr. Deputy Speaker

Order. I remind the hon. Gentleman that this is an intervention, not a speech. Will he please address the Chair?

Mr. Litterick

Is my hon. Friend seriously suggesting that low pay did not occur until what he has called unrestricted collective bargaining occurred in industrialised economies? If he is not saying that, what is he saying?

Mr. Radice

I am not saying that. What I am saying is that under unrestrained collective bargaining the biggest rewards go to those with the biggest power. It is not a recipe for reducing differentials. It is only under incomes policy that any attempt has been made to reduce those differentials. It has not been entirely successful, but it is only under incomes policy that the attempt has been made.

I am often told by my colleagues that once we get to a Socialist society things will be different. But I have never understood how one gets to Socialism by aping the most selfish attitudes in society today. I do not believe that that is the way forward to Socialism. For Socialists, I believe, there is no alternative but some kind of incomes policy.

Of course, I accept the argument that incomes policy, and this stage of incomes policy in particular, can be improved and should be improved. The most important thing, as my hon. Friend the Member for Berwick and East Lothian said, is that incomes policy should be seen to be fair. One key element in fairness is that those who settle within the limit should have at least some guarantee that others will also settle within the limit. That is the major problem at the moment. That indeed was one of the main arguments put for a statutory incomes policy on the lines of that of the Conservative Government.

My own experience of statutory incomes policy on the lines of that of the last Conservative Administration is that it is counter-productive. But the Government must have some weapons in their hands. The sanctions they possess at the moment are patchy and not always credible. There is a case for strengthening the powers of the Price Commission to refuse price increases to companies which deliberately and obviously flout the pay limits.

On issues like low pay, differentials, anomalies and so on, we have had over the past two or three years a plethora of ad hoc inquiries producing all sorts of results. The reason is that they have no consistent policy or view. So I think that there is a case, despite trade union opposition, for a body set up on a voluntary basis and with the participation of the trade unions which could make considered judgments on matters of this kind. Trade union participation is important for two reasons. The first is that collective bargaining is at least partly a bargain between trade unions as well as between employers and trade unions. It is a bar- gain about how the cake is to be shared by employees. The second reason is that, if the trade unions do not participate in making policy, they have no right to criticise if the policy is wrong because they have not shared in trying to work out the details.

I also agree with those who say that incomes policy must be seen in a broader context. That is why I believe strongly in the idea of a social contract Prices have to be taken into account. It has to include all kinds of incomes and wealth and it must be seen as part of a move to greater equality. It will also have to be supported by moves towards more industrial democracy. That is why I welcomed the mention of industrial democracy in the Queen's Speech. Many more people are coming to believe that trade unionists must have a greater share in the running of industry. Trade unions have considerable power, but it is a negative power. On the whole, it is a power to stop things happening. I should like trade unionists to have more positive power and much more constructive power.

Finally, I say a word or two about this House. Many of us now agree that Members of Parliament should play a greater role and have greater powers in the surveillance of Government policy, especially economic policy. It will not surprise the House to learn that I am a strong supporter of the proposals of the Procedure Committee to strengthen the Select Committee system as I was a member of that Committee, and I am disappointed that there is no mention of this in the Queen's Speech. I hope very much that over the next few months the Government will make a statement that they support the main proposals in the report of the Procedure Committee. It would be ironic if a Government who in so many other respects have rightly prided themselves on democratic reform did nothing to reform this House.

The Queen's Speech deserves wide support in this House. Once again the Government have shown themselves to be a reforming Administration with policies which they are prepared to see through. It seems that they will secure a majority in the House tonight, and I am certain that, whenever the General Election comes, they will also have the backing of the British people.

8.13 p.m.

Mr. John Biffen (Oswestry)

As the first English Conservative to take part in the debate from the Back Benches today, I should like to congratulate the hon. Member for Berwick and East Lothian (Mr. Home Robertson) on a charming and engaging maiden speech. We liked his references to his predecessor, who had friends in all parts of the House, and I must say that I welcome the hon. Gentleman's arrival as a reinforcement to the dwindling band of patrician land owners in this House. I hope that he will be able to bring his considerable agricultural experience to bear in our debates in the future, if only to correct the obvious misconceptions of the hon. Member for Cornwall, North (Mr. Pardoe), who was able to conduct an inquest upon the recent price of bread without taking account of any of the evidence supplied by the Food and Drink Industry Council that the Common Market levy on wheat was as high as the world price itself.

However, this is not one of those pastoral occasions, and therefore I turn to the economic debate which has preoccupied the House and say how refreshing it was to hear the hon. Member for Liverpool, Walton (Mr. Heffer) digress a little upon incomes policy.

The hon. Member for Walton is the divine discontent of these debates. Ever since the halcyon days of the 1966 Prices and Incomes Act he has been here, baleful, irritated, hectoring, warning and usually being vindicated about the ineptitude, inadequacies and foolishness of the policy. But I thought that the discontent was that much sharper today because something called "monetarism" seems to have infected many parts of the House hitherto thought to be immune from the disease.

It is one of the fascinations that whether it is experience, fashion, events or conviction, there is no doubt that among many hon. Members—including, for all I know, the Lord President—there is now an acceptance that monetary policy is indispensable in the management of economic affairs, so much so that at one stage today the Chancellor of the Exchequer berated my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) for using arguments which were giving monetarism a bad name. That might be a useful starting point for what contribution I have to make. It is that although monetary policy has a central role it is not the exclusive requirement of economic policy. The Prime Minister, who, rather like a mediaeval schoolmarm, is addicted to the three-legged stool, says that he wants a monetary policy but also a tax policy and also, of course, an incomes policy. He rather distanced himself from my right hon. Friends on the Opposition Front Bench, thinking that he stood for qualified monetarism whereas they stood for some crude, unrefined product.

The Prime Minister is very amiable and I have a great affection for him. However, there is a learning curve, and the truth is that the right hon. Gentleman has arrived at refined monetarism about two years after my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), because in his Stockton lecture of 1976 he said: monetarism is not enough; there are other parallel imperatives". It seems to me that it would be a truly helpful pre-election debate if we could concentrate upon what were the most appropriate supporting policies of monetarism.

The Prime Minister and the Chancellor of the Exchequer have made it quite clear that, for them, incomes policy is in a major supporting role. At this point I think that it is always helpful to define for oneself and one's audience just what is meant by "incomes policy". In my mind there is only one definition which is adequate. It is that it is a policy which gives the Government or their agencies the power to identify, select and enforce differential wage movements throughout the whole economy. It really is to that that the present Government have committed themselves, including the Lord President, who is one of the most unhappily reformed characters on the Treasury Bench.

There are many cases which can be made against this policy. They have been made with great force today. I shall not be repetitious, but I want to add four reasons why I think it is a policy which is defective and which in its totality can be profoundly dangerous.

First, it is an absolute illusion to suppose that incomes policy will produce higher productivity. If anything, it will lead to marginal distortions which in their cumulative form are damaging.

Secondly, I do not believe that incomes policy will relieve poverty, because the politicisation of wages almost certainly leads to higher unemployment than otherwise for those in low income brackets. In any event, I am inclined to agree with the hon. Member for Walton who said that on the cumulative evidence it did not look as though it was very effective to that end. If this House wants to do something about poverty, which is a legitimate objective, it has to be done through social policy—for example, a policy in respect of child benefits—or through the tax system. That is the way to do it, rather than attempting to politicise wage negotiations.

Thirdly, I do not believe that an incomes policy will disarm trade union power. Eventually, the unions are more likely to try to accommodate it in a corporatist fashion. However, I must dissent from my pair, the hon. Member for Chester-le-Street (Mr. Radice), because it seems to me that the more he elaborated the role that he was casting for the trade unions the more my analysis seems to be justified.

Mr. Radice

That is not so.

Mr. Biffen

I am glad that the hon. Member has made himself clear. Perhaps we can debate this on another occasion.

Mr. Litterick

We should.

Mr. Biffen

The hon. Member for Birmingham, Selly Oak (Mr. Litterick) confirms my wisdom and I am worried. Perhaps we can adjourn this debate and continue it on another occasion.

If there is genuine concern about the exercise of trade union power, one should make no mistake. That invites the House to consider the appropriateness of the present law and how it might or might not have to be modified.

Finally, the policy will lead to a deep sense of injustice over a period of time. If I were to have to identify the most likely source of injustice from the present phase of incomes policy it would be the application of the black list. Does anybody seriously suppose that if British Oxygen concludes a settlement outside the 5 per cent. British Steel will be invited not to order oxygen from BOC? Does anybody suppose that the same injustice and the same law, enforceability and rigour will be applied to British Oxygen as to some luckless road haulier in the West Midlands? The question has only to be asked to render the answer. Once again it is a demonstration of how the policy teeters between farce and tyranny.

If that is not an appropriate supporting policy for monetarism, what is a preferable alternative? My right hon. Friend the Member for Leeds, North-East in his Stockton speech said: The strict and unflinching control of money supply, though essential, is not enough. We must also have substantial cuts in tax and public spending and bold incentives and encouragements to the wealth creators, without whose renewed efforts we shall all grow poorer. I should like to test that policy against the Queen's Speech and our immediate situation. I believe that there is a requirement on the House to see that there is a curb on public spending so that it is stabilised in real terms. That is an immediate and attainable objective. In the context of the Queen's Speech it means a rejection of the enhanced role being sought for the National Enterprise Board.

Mr. Michael Morris (Northampton, South)

Does it not also suggest a rejection of the further reorganisation of local government?

Mr. Biffen

Yes, but I do not wish to make my hon. Friend's speech.

I agree with my hon. Friend the Member for Aberdeenshire, West (Mr. Fair-grieve) that there must be a change in the balance of taxation so that we tax people more in their spending capacity than in their earning capacity. In the present context I believe that the regulator should be used in respect of excise duties on alcohol, tobacco and petrol. I do not believe that we can defer that increase in taxation.

The Government must so arrange their spending and taxation that the borrowing requirement does not necessitate an over-reliance on high interest rates. The present level of borrowing is profoundly unhealthy for the conduct of public finance. That fear is validated by the movement today of the minimum lending rate to 12½ per cent. The balance is inappropriate. The only immediate action that can be taken is the use of the regulator as a preliminary to budget estimates which will be converted into public spending of the restrained character to which I have referred.

I turn to the question of trade union reform. The debacle of "In Place of Strife" and the efforts involving the Industrial Relations Act may persuade hon. Members that somehow or other that item has been taken off the agenda. However, I do not think that it has. Again and again there will be growing anxiety that the House should address itself to this delicate, social and political issue.

The Prime Minister said: Not crossing the picket line has become an expression of solidarity to a degree which I certainly did not know in my younger days. I wonder whether he thought of that at the time of Saltley or when he was advising the Leader of the House on what legislation was appropriate for trade unions in the early part of this Parliament. The Prime Minister continued: There are a few wild voices today which are seeking to thrust vital groups of workers into the forefront in the belief that the State will not in the end be able to resist a withdrawal of labour by such workers. We should address ourselves to this subject with considerable delicacy. As a West Country radical I always warm to the Leader of the House in his denunciation of those great established interests in the land which he thinks from time to time need a little verbal discipline. For occasional reference I keep his comments close by me. Some years ago he said: Trade union leaders are not a special breed of humanity, always to be shielded from the rough breezes of democracy, rare birds to be protected by special game laws. That is not the rhetoric that I would recommend when approaching the question of trade union reform. I would rather turn to the Prime Minister, who said of the industrial democracy provisions: We hope that as far as possible the arrangements for extending industrial democracy in factories and workshops will be secured through voluntary agreement and through negotiation."—[Official Report, 1st November 1978; Vol. 957, c. 40–53.] I should like to see reform within trade unions proceed on a voluntary basis, but we delude ourselves if we think that at the end of the day there is no role that Government, State or Parliament can fulfill.

I turn to tonight's debate. The supporting roles which I should give to monetary policy are to be preferred to the Government's reliance on incomes policy, although ultimately that is clearly an issue to be debated and judged by a wider electorate. I believe that the present economic situation is deteriorating. On the whole I should prefer an early rather than a late election. The county of Shropshire is adequately represented in numbers and exquisitely represented in membership. Therefore the problems do not arise for me as they arise in the Province of Northern Ireland. I appreciate the arguments portrayed by my right hon. Friend the Member for Down, South (Mr. Powell), but I suspect that a pre-election Parliament will simply not be invested with that sense of austerity which our present situation requires. I think that an election will end that situation and at least offer a chance of monetary policies being buttressed by overall liberal actions rather than being buttressed by the steady and debilitating intrusion of the State into every boardroom and on to every shop floor.

8.30 p.m.

Mr. Dafydd Wigley (Caernarvon)

Perhaps the House will forgive me for not taking up some of the arguments about which party has done the most somersaults on incomes policy over the last few years, or go down the by-road on the question of trade union reform, because I do not believe that playing with the symptoms solves any problems.

Perhaps I can do what other speakers have done and refer to the programme on which I and my colleagues were elected in 1974. The right hon. Members for Western Isles (Mr. Stewart) and Down, South (Mr. Powell) did that, and to some extent so did the hon. Member for Berwick and East Lothian (Mr. Home Robertson) when he referred to his own recent by-election. I congratulate the hon. Gentleman on his maiden speech.

We in Plaid Cymru were elected under three main headings. One was constitutional change. Although the proposed Welsh Assembly under the Wales Act is far short of what we would like to see, it is something which is worth establishing and we welcome the announcement of the date of the referendum. A number of other problems need to be sorted out in Wales in relation to the referendum, and we believe that in all probability we shall have a somewhat more constructive approach from the present Government than from a possible Conservative Government, because the Conservatives have had nothing but a totally unconstructive approach to the whole question of the referendum and the Welsh Assembly.

The second heading under which we stood for election related to the economic well-being of Wales. For many years we pressed for the setting-up of a development authority. We now have the Welsh Development Agency. In many ways its work is falling short of what we would hope, but at least it is there and it is doing some good work. We also pressed for a development authority in rural Wales. That has been established and is doing excellent work in all directions. We pressed for an economic plan. We do not yet have that, but it is something which we hope will still progress. I suspect that we are marginally more likely to get it from a Labour Government than from a Conservative Government, although both Governments have been sadly lacking in this direction.

The third heading under which we stood election was that of safeguarding the Welsh language. Our language interests are known in this House. This Government have increased contributions to several bodies relevant to the Welsh language and have taken some steps on the most critical question of the establishment of the fourth television channel in Wales. We feel that the delays until 1982 in the timetable announced this summer by the Government are totally unacceptable. We hope that there will be some way of streamlining this critical path. We also hope that funds will be available for the early establishment of more Welsh language television programmes for children. We also welcome the announcement in the Queen's Speech of greater resources for the teaching of the Welsh language.

It is against these three headings that we must measure the Queen's Speech. When the announcement was made that we were not to have an election this autumn, Plaid Cymru made its position quite clear in relation to the forthcoming Session. We made it clear that there was no question whatever of our doing what the Liberal Party did—entering any sort of pact agreement or coalition. We also made it clear that there were certain issues for which we would be seeking in the Queen's Speech, and that we would judge the Speech on its merits with particular regard to those issues and to any other relevant matters.

The issues included primarily unemployment, and we stressed the need for additional funds for the Welsh Development Agency in order that it could step up the work which it must undertake to get more jobs for Wales. We referred to the need for compensation for slate quarrymen suffering from silicosis, for those hundreds of people suffering from this terrible disease and for the widows of many hundreds more. We stressed the need to accelerate the fourth television channel as well as the need for a Bill to provide more funds for teaching the language. We stressed the need for leasehold reform—there are several areas in Wales where there is a severe problem in this direction. We pressed for help for young persons going into agriculture who were trying to buy a farm for the first time, something which is virtually impossible these days.

Let us look at what the Queen's Speech contains in relation to these headings and our general programme for the last election. The Financial Times, not a newspaper which I always quote in relation to Welsh interests, spoke of "unprecedented Welsh measures" in the Queen's Speech. The BBC reported it as the "Welsh" Queen's Speech. I am not quite sure whether it was a Welsh Queen or a Welsh speech, but the BBC made the point. Therefore, four of the six issues which we itemised had, to a greater or lesser extent, been included in the speech. Subsequent to the Queen's Speech there have been further announcements. There is the possibility of progress on leasehold reform in this Session. We had the announcement of 1st March—St. David's Day—as the date of the referendum, to encourage agricultural production and we also had welcome steps this afternoon to help small businesses.

We cannot in all conscience vote against a Gracious Speech with such a massive Welsh content. That is a point that has been recognised not only by ourselves but by the hon. Member for Cardigan (Mr. Howell), who will go in a different direction from the rest of his party tonight.

However, we must stress that we are not in any way putting ourselves in a pact with this Government. In the coming months we shall continue to do what we have done in relation to this Queen's Speech—try to measure any proposal on the balance of its content. We shall support items that are of relevance and benefit to Wales and oppose those that are not.

I take this opportunity to warn the Government that if the electricity reorganisation, referred to in the Queen's Speech, follows in detail the lines of the Plowden proposals, we shall most certainly oppose it. I warn the Government even more that if a proposal comes forward to increase the price of petrol by 20p a gallon, with all the serious consequences for the rural areas, we shall do everything we can to stop it.

This brings me to the Conservative amendment tonight. As the hon. Member for Cornwall, North (Mr. Pardoe) said, this is really an amendment calling for an election rather than judging the economic content of the Queen's Speech. Personally, I would have been very glad to have had an October election. On the day that the Prime Minister announced that there would be no election, my party won a seat in my constituency on the local council that it had never won before. We achieved 63 per cent. of the vote in a three-cornered contest.

But there was no election and now we must balance against a possible election the consequence of losing this programme for Wales. Would any new Administration, whether Conservative or Labour, go forward with these sort of proposals? The Conservatives would not.

I wrote to the Leader of the Opposition on 15th September to ask what the Conservative Party had in mind for Wales. It was interesting that on two questions I drew an absolute blank. There was no response. I asked a question about the Conservative attitude to reducing unemployment and increasing the effectiveness of regional policy, which has been eroded. There was not a word of response on that. I asked what proposals a Tory Government would have for helping those people who were suffering from silicosis and pneumoconiosis, and surprisingly there was not a peep of a reply.

But, then, there is a possibility that Labour would win the next election. However, there is no guarantee at all that we would see these measures forthcoming from a new Labour Administration. There might be new priorities. Other measures that have been excluded from this Queen's Speech might find their way into the next one, in a new Government. Therefore, in the interests of Wales we feel it is necessary to go forward this Session and get these measures accomplished.

That does not mean that we are happy with the unemployment figure which has passed the 100,000 mark in Wales. We have heard this afternoon of the declining unemployment in Britain as a whole, but this has not been the pattern in Wales in recent months. Unemployment has passed the 100,000 mark for the first time in 40 years.

We seek a degree of economic planning that we have not had before in Wales. We want to make sure that we do not underspend against the cash limits that we have as in previous years. Last year we underspent by £57 million in Wales against cash limits. Of this, £17 million was on roads, £14 million on housing and £26 million on water and sewerage services. That £57 million is equivalent to 10,000 jobs. This is something that we want to see avoided next year.

We want to see initiatives on communications—on our air services and roads—in Wales. We believe that there is room to look at the possibility of more stockpiling of certain types of steel, of coal and of coke. In this context particularly the Nantgarw coke ovens most certainly could be kept open within the rules of the ECSC.

We look for an accelerated house building programme. It is ridiculous that there are 16,000 house building workers unemployed in Wales at a time when there are 60,000 people on the waiting lists for council houses and there are over 100,000 unfit houses in Wales. This could be done and done quickly.

We look for progress with earlier retirement, cutting unnecessary overtime, the reactivation of regional policy and a restriction on non-essential imports.

We suspect that we would not see any of these measures from an incoming Conservative Administration. Certainly in the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe) there was not one positive proposal for overcoming the economic problems of Wales.

Governments are elected to get things done. We look to Governments to respond to the circumstances and the needs of Wales. Of itself, having a Labour rather than a Tory Government is insufficient. We contend that only when we have a Government who are aware of Welsh needs and a group of Welsh MPs who are independent of London party Whips will things get done in Wales. That is the rationale of our existence here. We hope that soon we shall be able to sort out our own problems in our own Parliament. In the meantime, the menu offered by this year's Queen's Speech represents as much as we are likely to get in present circumstances from this or any other London Administration. For that reason, we shall vote against the amendment.

8.41 p.m.

Mr. Norman Atkinson (Tottenham)

Those of us who have been sitting through the debate and who have been able to do our arithmetic and translate speeches into votes can calculate, if we understand correctly what the right hon. Member for Down, South (Mr. Powell) has promised to deliver, that the majority will be three in the Division and that therefore the Government will survive.

That takes me on to the speech by the hon. Member for Oswestry (Mr. Biffen) and, at the same time, back to the days from which he was quoting. He quoted my right hon. Friend who is now the Leader of the House. In those days, I think that the hon. Member referred to me as "20 per cent. Norm". I can assure him that the same arguments do not apply now. I am arguing not for a 20 per cent. norm now, but for the total abolition of norms. That is the only change that I can detect in our argu- ments as they have developed over the years.

I link Oswestry with Down, South in the sense that the money gurus come repeatedly to the House and display this aplomb, this absolute brass neck in the way in which they present arguments which are not supported by a shred of evidence. The monetarists' whole case is unfolded yet again and massive assumptions are made. These economists make their assertion in support of their case without producing any evidence. No other profession in the world could do that and survive.

When the right hon. Member for Down, South reads his speech tomorrow, he will see there contradictions on the question of velocity in the economy and what happens as a result of the rapidity with which money is used and the effect of the rapidity of exchange within the economy and its effect on money supply.

I consider today's announcement about minimum lending rate to be outrageous. An increase in bank rate at this point is an affront, almost deliberate sabotage of what is being done to the economy. It is as though the Government had devoted themselves to devising a method by which they could deliberately increase unemployment and scuttle any hope they have of a successful wage policy. If many of us had been asked to devise a way by which to undermine wage negotiations and a return to full employment, we would have nominated an increase in the interest rate of 2½ per cent. at least. That decision will have a greater effect on inflation than will a hundred Ford-type settlements. That must be in our minds when we appreciate what will happen as a result of a minimum lending rate of 12½ per cent.

I have been challenged by Labour colleagues to substantiate the call for the abolition of the present wage policy. Many hon. Members have referred to the policy as the voluntary-involuntary policy, or the statutory non-statutory policy. I have been asked why Socialists such as myself are opposed to these ideas. I wish to take a few moments to set out my view.

All wage policies in a mixed economy, and certainly in a capitalist economy, are of necessity policies of wage restraint. They cannot be otherwise. There is no way in our kind of economy in which we could devise a wage policy by which it is possible for a Government to instruct employers in the private sector to increase the wages they are paying to their employees. Again that cannot be done.

Therefore, in that context there is no transfer of resources. There is no way in which the Ford workers will say "We will stand back to enable somebody else to have a little more". There is no mechanism by which we can transfer resources or move wage levels in our economy. Certainly by such a method one cannot transfer resources from the private to the public sector, particularly into the social services. The present policy by its nature is a policy of wage restraint. If we put upon it a figure of 5 per cent., with an inflation rate of about 8 per cent. this year, we know that even if we allow for the tax allowances in respect of increased margins, thresholds and all the rest of it, it must mean a drop in living standards this year. In these circumstances, the Government should not expect their supporters to argue in favour of such a policy.

In face of an increase in MLR to 12½ per cent., it must be regarded as sabotage to say to workers that their levels must be lowered. That is a lethal argument when the whole of our activities should be directed to the attainment of economic growth. Part of the alternative strategy in seeking to get out of our present difficulties is to go for growth. However, we cannot take that course if restraints are built into the system. Such a policy assists an employer who is hostile to a wage increase.

The phrase "free bargaining" is a misnomer. I have never heard of an employer standing at the factory gate handing out spare wage packets and saying, "Here is a little more. Please take it with you because it might help."

Mr. Litterick

Does my hon. Friend agree that the reason the Government are afraid to go for growth is that they do not have a trade policy to allow them to go for such a policy without the community immediately incurring a devastating penalty?

Mr. Atkinson

My hon. Friend has put the point precisely. In the absence of some restriction on trade and imports, my hon. Friend will know that it is not possible to go for growth because the methods which would have to be employed by the Government to obtain it would have to be hived off into additional imports. That would be a contradictory policy.

Let us consider what the Government's policy will mean. The Government are envisaging the start of a permanent wage policy. The longer this continues, we all know that there will be no hope of getting away from the permanent element built into the system as it now stands. On 31st July next year we cannot suddenly escape from the limits of the restraints built into the system. However, we know that there is a General Election in the offing—and what is quite certain is that the Labour Party will not go into it with a manifesto based on a permanent wage policy.

For the British Labour Party, on the basis of the conference decisions, there will be no phase 5 spelt out in our manifesto. There will be no arguments at the next General Election that this party is campaigning on the basis of a further incomes policy. I am certain that that will not be in the manifesto. That is what the discussion is about and why the debate is so important.

What has happened? What are the effects of the present wages policy? What is the distortion? I shall relate the answer to the Ford question a little later. This morning I dug out some overtime figures, which are staggering. I am sorry that my Socialist friends who argue for a permanent wages policy are not here, because I should like them to know that overtime comes into the matter.

Over the post-war years we have had a dominance of incomes policy, a whole succession of incomes policies. That fact has ensured that overtime working is now an integral part of our system in industry. At a time when we have more than 1½ million unemployed, the overtime figures are alarming.

In the week ending 12th August, the latest date for which we have figures produced by the Department of Employment, in manufacturing alone 30 per cent. of the work force worked 8.8 hours overtime each per week. About 1,600,000 workers worked a total of 14 million hours overtime a week in manufacturing alone in August. In July the highest weekly figure was 17½ million hours of overtime in manufacturing. All this was because of incomes policies.

One assessment made not by the Department but by the trade unions, in a survey based on 2½ million manual workers in the service industries, is that 18 million hours' overtime a week is worked in those industries. When we put the figures together we see that there is an overwhelming case against what is happening. The whole fabric of our industrial life is now conditioned by the hours of overtime that are available.

If we reduced the hours worked by married women working in full-time jobs as well as the hours of overtime, there would be a revolution in the country. Then we should see exposed the true character of wage rates and the fact that we are a low-wage society.

I now turn to the argument about Ford, which is very interesting. I shall take a 10-year period from July 1968 to October 1978. In July 1968 grade E workers, skilled workers, were receiving the equivalent of 56½p an hour. Their latest rate, up until 21st October this year, was 194.2p an hour. That is the top skilled rate at Ford, the one that is now being argued about.

Over the 10-year period the grade E workers—there are five grades—have gained 21p an hour in advance of the retail price index. They have increased their living standards over that period by 21p. an hour.

It is possible to measure precisely what is happening at Ford. Having had some experience of machine shop techniques, I have had a look at some of the figures. The comparison in metal removal, the weight of metal and everything else is exact.

What has happened to the Ford worker? I have looked at all the figures relating to manufacture of a four-cylinder engine and exactly comparable retail prices from the same source. In 1968 it took a grade E Ford worker—a skilled worker, I remind the House—90 hours to earn enough to pay for his own product in the engine shop. Today, although he has gained on the retail price index by 21p an hour over the 10-year period, he takes 105 hours to earn enough to pay for his own product, viewed in exactly equivalent terms. So who has gained as a result of an incomes policy? What is happening to restraint? Does that benefit the customer? Does it benefit the nation? It certainly does not benefit the Ford worker in the purchase of his own product.

What has happened on the railways? We have comparisons there, too, in what a weekly ticket costs in terms of hours to be worked by an engine driver. It takes an engine driver now far longer to earn enough to pay for a weekly ticket—to pay for his own product—than it did 10 years ago. One can go through most of the trades in the country and ask skilled workers particularly, but all workers in all grades, doing a precise exercise, how long it takes a worker today to earn enough to pay for his own product as compared with 10 years ago, and one finds that he has to work longer.

So it is against the interests of the workers and of trade unionists generally to support policies of this sort. These are the reasons why we are opposed to, and have consistently opposed, the introduction of a wages policy of this sort. So, without going into the interesting questions that have been raised about monetary policy, I want to deal with some of the major issues about wages policy and the reasons why we should get rid of it shortly.

I hope that within my remarks there is ample evidence that the case against wage policy is based on fact, that, a long way from being a Socialist proposition, it is against the interest of the workers we on this side of the House claim to represent. That is the contradiction. That is why we say that the sooner the Government come to the conclusion that we have to start practising policies and an alternative strategy, not only on cheap money and a stable pound—these are essential ingredients of the alternative approach—and allow workers responsibly to negotiate against prices that they can agree, whether in the public sector or private industry, the better. Let trade unionists come to grips with the price of their own product. Let them bargain their wages against prices in the way in which they have often claimed the right to do.

Mr. Ron Thomas

My hon. Friend will have noted that the Gracious Speech talks about industrial democracy. A number of our colleagues are much in favour of industrial democracy while being at the same time in favour of a statutory incomes policy. Would not he agree that the best piece of industrial democracy for working people is to be able to negotiate their terms and conditions, wages and salaries, of employment?

Mr. Atkinson

Exactly, and not from the position of being board members. We are not advocates of that in this position. Let us talk about industrial democracy as a means of creating a mechanism whereby workers can responsibly bargain, backed by planning agreements, in a fair and equitable agreement with employers across the table, first, on their own wages and, secondly, on the question of the price of their own product. Let all workers become involved in the battle against inflation. In the coalfields, let the National Union of Mineworkers talk about the price of the miners' product in its wage bargaining.

The whole question of subsidy and the rest and of the allocation of resources should be a matter with which trade unions are directly concerned. If they are saying that in some area of industry the bargain that they are about to strike means an increase in the price of their product above the goal set by the Government, we have to talk seriously about a reallocation of resources, subsidy and the rest.

There is I believe a positive alternative strategy which can get us out of the position in which we are placed. Yes, free wage bargaining can get us away from mass unemployment; it can allow us to escape from the grip of some of these falling standards to which I have referred. I believe that there is a comprehensive case in support of a shift from the policy being pursued by the Government.

9.0 p.m.

Mr. James Kilfedder (Down, North)

A great deal of frustration and resentment has been building up in Northern Ireland over one aspect of the Government's pay policy which does not affect either England or Wales but which places Northern Ireland in an inferior position in relation to the rest of the United Kingdom. I refer to the pay parity arrangements. In both the public and private sectors trade union negotiators in Northern Ireland agree settlements based on negotiations conducted at national level. The purpose is to ensure that Northern Ireland workers obtain the same wages and conditions as workers elsewhere in the United Kingdom.

The rigidity of the pay policy has broken down that arrangement. There is, naturally, a time lag between agreement being reached in London and the end of negotiations in Northern Ireland. If agreement on pay parity had not been reached before the magic date of 11th July 1975, when the first phase of pay policy was introduced, the Government say that parity in pay is not permitted to the Ulster workers. That is a ridiculous situation and one which I cannot countenance.

Many groups of workers are caught up in this nonsense. The argument that is put forward by the Government to justify the injustice is completely without a vestige of validity. If they were sincere about the special cases which are mentioned in the White Paper they would accept that workers in the water services in Northern Ireland in particular are a special case. Some parts of Ulster have been without water supplies for many weeks because of industrial action by these men who are asking only for equality of treatment with their colleagues in England. It is absolute rubbish to deny them their claim on the grounds put forward by the Secretary of State for the Environment.

Meanwhile, towns and villages in the Province have no water to flush lavatories. Schools are closed and children are denied their school dinners. Mothers are driven to distraction in trying to cope with family work, while farms and factories are placed in an impossible situation. I call on the Government to put an end to the crisis immediately.

Some school teachers in technical colleges have been refused the conditions enjoyed by teachers in England. It is alleged that it would be a breach of pay policy to give teachers in Northern Ireland conditions similar to those which their English colleagues have enjoyed for four years. That argument is a complete distortion of common sense.

That is not the only unfairness which the Government have visited on the people of Ulster. I shall briefly list some of the others in order to explain to the Government and to others in this House why I shall vote against the Government tonight, unlike the right hon. Member for Down, South (Mr. Powell) and the six Unionist Members in his parliamentary group.

Ulster housewives have consistently had to pay more for their basket of groceries than have housewives elsewhere in the United Kingdom. The price of children's clothing and footwear is about 10 per cent. more in Northern Ireland than the average cost of these items in England. Electricity costs are three times higher in the Province than in Britain. Gas is about 10 per cent. or 12 per cent. more mostly in Ulster and coal is more expensive than it is in Great Britain. Ulster people have to meet colossal bills for heating and cooking. It is hard on everyone in the Province, but it is particularly hard on pensioners, especially those living in all-electric dwellings. It is against that catalogue of unfairness that one has to judge the average wage level in Northern Ireland.

According to the Government's figures, family incomes in Ulster is £6 or £7 less than the average for Great Britain. The rate of unemployment in Northern Ireland is more than twice the average rate for the rest of the United Kingdom. The proportion of claims for family income supplement is four and a half times what it is in England. The price of privately built homes in Northern Ireland has soared high above the average for the rest of the country, and ground rents and increasing mortgage repayments place an intolerable burden on young married couples in particular. The number of families on the waiting list for Housing Executive dwellings is disgraceful. The conditions in which so many people have to live in Northern Ireland are appalling.

The total picture that I present to this House tonight is one of social deprivation of a kind which has not been experienced in England since before the war. That war lasted six years. Many people in Great Britain thought that it was endless and morale began to suffer. However, the Provisional IRA has been waging its campaign of terror and hate in Northern Ireland for 10 long years. For 10 years the Ulster people, with remarkable tolerance, restraint and patience, have withstood that evil terror despite largely hostile news media and Westminster Governments who have frequently treated the Ulster majority with indifference or contempt. The present Government are no exception.

The Ulster people have had enough of English platitudes and English lectures. They want their rights, and I demand their rights tonight. That means not only a standard of living equal to that in the rest of the United Kingdom—which was promised by a previous Labour Government years ago but has not yet been provided—but full British democracy in Northern Ireland.

What have the Ulster people been offered in the Queen's Speech? They have been offered nothing except a paltry Bill to provide a few extra seats. I am surprised that the right hon. Member for Down, South welcomes the Bill and says that getting those seats has been his and his colleagues' main task since the last General Election. The people of Northern Ireland would say to the right hon. Gentleman and his hon. Friends that that is not their main task. Their main task is to harass the Government, not to keep them in office.

The people of Northern Ireland will find great anger in their hearts tomorrow when they read the result of the Division. There is to be no Stormont Parliament for Northern Ireland people, but Scotland and Wales are to have an Assembly. There is to be no referendum for the Ulster people, but there will be referendums for the people of Scotland and Wales. The Ulster people have been offered a few extra seats in this House. That is a mean offer, when we should have had 21 or 22 seats here. What is offered in the Bill is an insult to the people of Northern Ireland.

I disagree with the right hon. Member for Down, South. The people of Northern Ireland are sick of patronising English politicians lecturing them from Westminster. In the name of the long-suffering and hard-pressed Ulster people I condemn the Government. I regret that the Government cannot be defeated in tonight's Division. That is because the right hon. Member for Down, South and his colleagues will ensure that they survive.

9.8 p.m.

Mr. Angus Maude (Stratford-on-Avon)

According to a convention, it falls to me to sum up, as will the Leader of the House, today's debate on the Opposition's economic amendment and the whole debate on the Queen's Speech. I doubt whether the right hon. Gentleman or I will feel able to do that in 25 minutes each. I shall confine myself to a considerable extent to today's debate, although it has been assumed by a number of hon. Members that tonight's Division will involve a judgment on the whole of the Queen's Speech.

At the outset I wish to congratulate the hon. Member for Berwick and East Lothian (Mr. Home Roberston) on his maiden speech, which I am sure everyone enjoyed. It may be that it did not conform completely to the convention that a maiden speech should be non-controversial. However, it was not dull and we shall look forward with enjoyment to hearing him again.

I should also say at the outset that we welcome the decision of the Liberal Party and the Scottish National Party to vote for the Opposition amendment. We note that the representative of Plaid Cymru, having no doubt consulted his colleagues, has decided that he has no confidence in the intentions of the next Labour Government towards Wales. However, he reckons that he has the present Government so firmly over a barrel that he had better keep them there until he has squeezed the last drop out of them.

We also noted that the right hon. Member for Down, South (Mr. Powell), after a deep economic analysis of the present position, came to the conclusion that the important thing was to get his Representation of the People Act as quickly as possible. That seems to be the way in which the decision tonight will be taken.

The Queen's Speech was, as we know, quite deliberately designed to keep the present Government in power with as little trouble as possible, and with the maximum support from the fringe parties. Some of my hon. Friends have begun to feel, Mr. Speaker, that this has become a Celtic fringe party Parliament, because today, with the exception of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) and myself, only one English Conservative Member has been called to speak—[Interruption.] My right hon. and learned Friend is a Welshman, so that makes the position worse. We have had a slanging match between various Scottish splinter groups, a wide diversion between two separate Ulster Unionist parties, and, in one way and another, the rights of English Members, at least on the Opposition side, seem to some of us, Mr. Speaker, to be in some peril. It is something that perhaps the usual channels might care to discuss.

As to the Queen's Speech, and the amendment with which we are dealing today, I noticed that in an amusing article in The Guardian one of its political writers said about the Queen's Speech that it was so innocuous that it might almost have been written by the Royal Family. Nevertheless, of one thing we can be certain. The Chancellor of the Exchequer's speech today was so bad—or, at least, the second half of it—that he must have written it himself. We have heard from the representatives of those parties whom the Queen's Speech was designed to attract. Well, a drib here and a drab there—it all adds up to something, one must suppose, but it cannot be said to be particularly attractive when dealing with the economic problems of this country.

This is the last Session of a Parliament in which the tired remnants of this Labour Government might have been expected to make good their boasts and promises of the past with some constructive policies which might do something about unemployment, about industrial expansion and about the creation of wealth.

It is perhaps appropriate that, at the end of the last Queen's Speech in this Parliament, we should look back at the record of the Government, and at some of the things which the Chancellor and the Prime Minister are now claiming, compared with what they once claimed. It is the Lord President of the Council who is to reply to the debate. We remember that perhaps one of the most impressive things he ever said was when he assured the readers of the Daily Mirror, from the fastnesses of the Department of Employment, that he had not come here to preside over mass unemployment. Being an honourable man, he honoured his pledge to the letter. He got the hell out of the Department and let the new Secretary of State preside over it.

Mrs. Elaine Kellett-Bowman (Lancaster)

The Lord President does not care, does he? Look at him.

Mr. Maude

It was, of course, a perfectly decent and natural reaction for an honourable man, as we know him to be. So are they all, all honourable men. And women, too, of course. I had forgotten the Secretary of State for Education. The right hon. Lady was also on record, at the time of the October Election in 1974, as saying that there was no indication that there were any more price increases in the pipeline. She did not hang around to preside over the largest bout of price inflation in modern history, either.

The Chancellor of the Exchequer is the only one who has really stayed put, firmly and doggedly. We know what he said in the election of 1974. He said that the rate of inflation was running at 8.4 per cent. He also said on the same day—though to a different audience: I"— note the "I"— have cut the rate of inflation I inherited by half. My right hon. Friend the Leader of the Opposition said in her speech last week that the Chancellor had said that the inflation rate was 8.4 per cent. Of course it was not. There are some of my right hon. and hon. Friends who have assumed from that that he knew that it was not. I do not assume that at all. Being the least cynical and suspicious of men, I am perfectly prepared to believe that he genuinely thought that that was the going rate of inflation. After all, he has believed so many extraordinary things in his time that it would not be very surprising if he had believed that. He has gone on—and I said that he was the only one who has stayed firmly put—believing so many things, for example, that the economic miracle was just around the corner.

Perhaps the most familiar cry that echoed around the corridors of Westminster and beyond were the words "I think I've got it right this time" 13 or 14 times, each time just before the roof fell in on him again. If he believed that—and I am perfectly prepared to believe that he thought it was so—all we ask of him is that he should not try to have it both ways.

There is one thing that follows inexorably from his belief that the going rate of inflation was 8.4 per cent. in the summer and autumn of 1974. It is that if he claimed to have cut the rate of inflation which he inherited from the Conservative Government by half, he must have been claiming that this success was due to the policies and actions of himself and of the Labour Government. In that case, what followed after October 1974 must also have been due to the policies and actions of himself and the Labour Government. He cannot simultaneously claim that and also claim that everything that happened between 1974 and 1976 was due to the so-called mess that he inherited from the Conservative Government. He either got it right by October 1974 or he did not, and he had better make up his mind which it is. He can say now that he was quite mistaken about the 8.4 per cent. figure, in which case the electorate will no doubt view his claims and figures at the next election with a certain amount of reserve, to put it mildly. Alternatively, he can claim that he was right about the 8.4 per cent. figure. Then he has to admit that everything that happened after that was the fault of himself and his Government.

Indeed, if we were in any doubt about this, the most compelling verdict on the Chancellor's record during all these years—and they seem interminable—was provided by the Prime Minister in a speech at the Labour Party conference at Blackpool in September 1976. Hon. Members should take this to heart. The Prime Minister said: Over the last three years, whilst our domestic product has risen by 2 per cent. the increase in our public expenditure—including central and local government—has been 18 per cent. We have bridged the gap by higher taxation, by borrowing from abroad and, worst of all—by printing money. As a good reference for a Chancellor of the Exchequer over those three years and for the Government who supported him, that could hardly be bettered.

The fact is that the Chancellor of the Exchequer has stayed firmly put in the Treasury introducing Budget after auxiliary Budget with the dogged persistence of a gambler chasing his losses at the table: borrowing and borrowing at ever higher interest rates until finally the management—in this instance the IMF—stepped in and put him in a straitjacket.

The right hon. Gentleman is now torn between his desire to tell the country how responsible he is being now and how successful his policies have been and his desire to convince his fellow Socialists below the Gangway that he cannot wait to go mad again.

In March this year, the right hon. Gentleman said: I will offer you proper Socialism when we get a decent majority in the House of Commons to enable us to do it.". That, in the light of the record of 1974 to 1976, is perhaps not the most attractive prospect for the electors of this country. The theory of the cure by a hair of the dog that bit you has, as far as I know, been embraced only by chronic alcoholics, not by sound, sober, sane citizens.

We had always known, of course, that the gall of the Chancellor of the Exchequer was almost unmatchable. But in the second part of his speech today he excelled himself. The right hon. Gentleman spent a considerable time pointing out what he described as splits and divisions in the Conservative Party and in the Shadow Cabinet. I will deal with those later. He asked what we were going to do, and I will deal with that later. But—for sheer nerve, even by the Chancellor's standards, this was pretty good—in the course of talking about splits in the Conservative Party, not one word did we have about the fact that at the Labour Party conference at Blackpool this year, the policy-making body of the Labour Party threw out, by a two-to-one majority, the pay policy which the Prime Minister had consistently said was essential to the survival of the country and, what was more important to him, perhaps, the survival of the Labour Party at the next General Election. How anyone could imagine that the differences of emphasis on the Opposition side compared with that I cannot imagine, because the Prime Minister was saying that his 5 per cent. pay policy was essential to the Labour Government's policies, if not to their survival.

We have heard the Labour Party conference's verdict repeated again and again by Labour Members below the Gangway today and, incidentally, by the hon. Member for South Ayrshire (Mr. Sillars) in what was a striking and helpful speech. Yet, the Prime Minister, who asked us what we would do, still has not told us what he will do.

I noticed in The Guardian a report by, I think, Mr. Peter Jenkins, that at the Labour Party conference the Prime Minister had been overhead to say to the general secretary of ASTMS: I'm worried, Clive, I can't see my way through this one. I must tell the Prime Minister that we cannot see his way through this one either. If we could, not just see his way through it, but even see the direction of the path which he was trying to take, we might find it easier to support it. [HON. MEMBERS: "Oh, come on."] Oh, yes. The Labour Party and the Labour Front Bench can never grasp the difference between a responsible Conservative Opposition and an irresponsible Labour one.

My right hon. Friend the Leader of the Opposition said in her speech, quite rightly, that we should not try to undermine the pay policy of the Government in the same way as the Prime Minister and his colleagues did their best to undermine the pay policy of the last Conservative Government. But if we are to help him—goodness knows it is important enough for the future of this country that these problems should be solved—we must know what he means and what he is trying to do. That is what we simply do not know.

The Prime Minister apparently has said that 5 per cent. is the limit and that 5 per cent. is all that he is prepared to accept, that no one in any industry or firm should get more, subject to a few points on self-financing productivity agreements and so on.

But does he mean it? It does not look to us as if he can possibly mean it. It does not look to us as if, in the light of the Ford negotiations, the Ford strike, and in the light of settlements which have already been made, 5 per cent. can possibly be what he means. We are entitled to ask him, what figure does he mean?

I shall not waste the time of the House by asking the Leader of the House to answer these questions, because we know that he never answers any questions in any debate at all.

Mr. Madden

rose

Mr. Maude

No, both the Leader of the House and I have cut our time to 25 minutes, so I think that I should not give way.

If the Prime Minister—or the Chancellor or the Lord President—will tell us what they mean by this 5 per cent. figure, how far they are prepared to go, how much flexibility they are prepared to allow in negotiations and settlements, we should find it much easier to be sympathetic with him. But it seems to us that he is saying one thing and proposing to do another and that the left hand will not know what the right hand is doing. With the division below and above the Gangway, that is not uncommon in the Labour Party, but in this case it is a little too serious for that to be left where it is.

My hon. Friend the Member for Oswestry (Mr. Biffen) said a number of penetrating things about the difficulties of pay policy. We know only too well—we share our knowledge with the Prime Minister and with right hon. and hon. Members opposite—the troubles of pay policy and the troubles that one gets into with pay policies. My record, I think, is fairly consistent on this one. I have always said that circumstances altered cases. [Laughter.] It is surprising that Labour Members should find that so funny. If they do not believe that circumstances alter cases, there is something seriously wrong with them. It is pretty clear from their behaviour that some of them do not. In other words, they have not noticed that circumstances have changed and that they are standing still.

In 1972 and 1973, during the period in office of the last Conservative Government, in speeches at two consecutive party conferences I supported absolutely the pay policy of the then Conservative Government. [An HON. MEMBER: "The hon. Gentleman would, would not he?"] I was not noted for my slavish adherence to the party line. At the same time, I had always believed that only in the very last resort should any Government resort to a rigid pay policy. But I believed then—and with hindsight I do not change my opinion—that with a quadrupling of oil prices and a 90 per cent. rise in the cost of world food and raw materials, at that time a pay policy, pause or freeze, was essential.

But I never believed then, and I do not believe now, that it is possible to keep any form of pay control going year after year and hope that it will hold. The anomalies, injustices and the squeezing of differentials which will happen inevitably will make it impossible to hold.

Both the Chancellor of the Exchequer and the Prime Minister asked what the Opposition would do. Let me tell the House some of the things that we would do. First, we believe that it is essential immediately to cut the rates of direct taxation so that take-home pay is increased without the necessity to make irresponsible pay claims in order to increase take-home pay. We also believe that it is essential to stop trying to prevent the creation of wealth and to stifle and strangle initiative and enterprise. Unless we get rid of some of the disincentives to effort, employment and investment, we shall never create wealth and the jobs that the country needs.

The Opposition are perfectly clear about pay policy—[Interruption]. We are a darned sight clearer than anyone on the Treasury Bench. There we have a Prime Minister who pins himself to a 5 per cent. norm, average, maximum, minimum or whatever he chooses to call it. Because he has pinned himself to it without adequate thought, he has actually provoked a strike in Ford before negotiations have started. A Conservative Government would never do that.

Our pay policy, which was agreed by all of us, is set forth quite clearly in the publication "The Right Approach to the Economy". We have never varied from it. It is there for all to read on pages 13 to 17 of that document. We believe that there has to be flexibility in pay bargaining.

The Prime Minister asked "If some get more, who is to get less?" as though the answer must inevitably be that everyone gets the same. But that is what negotiation is all about. The hon. Member for South Ayrshire made this point clearly. He said that as a result of the pay policies of successive Governments, negotiation had become a lost art and that the skills and technique of the trained people who knew how to negotiate and how to arrive at a fair bargain had been lost. He was quite right. The longer that this goes on, the more certain this will become.

Unless this Government can say clearly what this pay policy means—and I ask the Lord President to do this—we must vote against them tonight.

It is clear—and the hon. Member for Cornwall, North (Mr. Pardoe) said this—that in the last resort tonight's Division is about whether there should be an election. On this side of the House we have no doubt that it cannot come too soon. We should welcome it. We have no doubt that there is no hope whatsoever for the Labour Party. All my right hon. and hon. Friends would love to have an election as soon as possible.

Government Members are euphoric about the Gallup poll, but they should remember what happened in 1970 when the Labour Party had an 8 per cent. lead and the right hon. Member for Huyton (Sir H. Wilson) called an election. They should look at the Marplan poll in the West Midlands. Above all, we know why the Government did not have an election in October. It was because Mr. Worcester told the Prime Minister that he could not win.

If the country is to get on the road to recovery it is essential that this tired, fag-end Government go. As soon as Mr. Robert Worcester is ready for an election, so are we.

9.37 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot)

I should like to follow the comments that have been made about the remarkable speech earlier in the debate by my hon Friend the Member for Berwick and East Lothian (Mr. Home Robertson). It was a speech of wit, charm and great generosity of spirit. Ever since he made it, all those who heard the speech have paid their tributes to him. I can assure him that those tributes are not formal in any sense.

It was a speech which paid great tribute to his predecessor, John Mackintosh. It also showed that we have a new Member of Parliament of strong character and great capacity. Indeed, as I listened to his speech the only criticism that I could find was that it was so good that it might be deduced that part of his victory in Berwick was due to his own qualities and not to the Government's qualities.

Many parts of the discussion have turned on other questions, but I shall seek to confine myself principally to the amendment, which was moved, or nearly moved, at the beginning of the debate. I thought that the amendment was extremely good. I am sorry not to see the leader of the Liberal Party in his place, because I wondered whether he was the author. I wondered whether we could account for the improvement in the literary standard because the right hon. Lady the Leader of the Opposition and her right hon. Friends had decided to adopt the ideas of the leader of the Liberal Party in order to assist in the vote or to seduce him, if that is not a too indelicate word.

It is a great change from the scenes that we saw a few months ago. I remember the effective speech of the Leader of the Opposition when she rebuked the leader of the Liberal Party in strong terms. But the Leader of the Liberal Party is now being elevated at a single leap from his youthful follies to eligible manhood. The right hon. Lady has changed her attitude too. There is now none of this "My young man" stuff. Not at all. She turned such a benign and eager eye on the right hon. Gentleman that she might be the serpent of old Nile herself. Therefore, I am glad to see the alteration in these matters.

I am very happy to give the leader of the Liberal Party a reference. Indeed, I do not see why he should not take a place on the Opposition Front Bench in order to draft these excellent Opposition amendments. I gather there are a few vacancies, and he would certainly be a very great addition.

I should also like to offer some advice to the right hon. Lady. She knows how jealous I am about all these divergences into which she happens to stray. But I think that she should follow more carefully the advice that I sometimes give her. She must be careful not to follow these extravagant charges against the Labour Party and its East European policies. I do not know where the right hon. Lady gets her information from. I suppose she gets it from the right hon Member for Newham, North-East (Mr. Prentice). But I must warn the right hon. Lady about him, because there is a strong rumour abroad that the right hon. Gentleman has not sacrificed or abandoned his revolutionary past at all. He has gone into the ranks of the Conservative Party as a kind of agent provocateur just to see what palpable absurdities he can pass off on the right hon. Lady. All I can say is that it is a theory with a great deal to sustain it. I only wish that we had thought of it earlier.

I should like to give the right hon. Lady a further piece of advice. Indeed, I offered it to her a year ago and if only she had followed it then she would be in a much happier situation today. There is the position of the right hon. Member for Sidcup (Mr. Heath) who I see is now trying to pass himself off as an ex-Chief Whip. I hope that the right hon. Gentleman has not now been thrown out like the others. I hope that he tendered his resignation in time. I am sorry to have to say it in the absence of the right hon. Gentleman—[HON. MEMBERS: "Tell us about the Government's economic policy."] I am trying to fill in the gaps of the hon. Member for Stratford-on-Avon (Mr. Maude) who told us that he would tell us about the divisions in the Conservative Party. I am trying to make good the omissions. Had the right hon. Lady followed my advice of a year ago she would be making it up with the right hon. Gentleman. He is the best of the bunch, even if—to quote Shakespeare again— the small choice in rotten apples. The right hon. Lady really should take my advice on this occasion and try to make a proper reconciliation.

I am happy to assist her further in that respect, because the hon. Member for Stratford-on-Avon said that the incomes policy of his party was absolutely clear. I am very happy to have the hon. Gentleman's assurance. But it was not absolutely clear at the Conservative Party conference, because I took the precaution of reading the report in that excellent journal, the Spectator, which carried the excellent reports of Mr. Frank Johnson which did not appear in The Daily Telegraph day by day because of an industrial dispute. If the House were to allow me to do so I could spend the rest of the evening reading extracts.

Mr. Johnson followed these matters very carefully. He described how the right hon. Member for Sidcup had received a great ovation. Then he talked about the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe). He went on to say that the right hon. and learned Member for Surrey, East praised the contribution of the right hon. Member for Sidcup and then went on to advocate more or less the opposite. The conference either did not notice this nuance or was not much bothered by it. Well, here in this House we have a great reputation to sustain and we have to look at the nuances.

In order to report this matter faithfully I must look at the report of the following day—and remember this was in a Conservative newspaper written by a most excellent Conservative reporter. Mr. Johnson said that although he was no longer in the hall, Mr. Heath's monstrous presence dominated the morning's economic debate. He was the spectre at the Ancient Mariner's wedding, though not having one's library to hand in Brighton one is unable to check the accuracy of the Coleridgean allusion. So perhaps it would be more correct to say that he was the albatross on the wall. Anyway, he was the spanner down the trousers of party unity, all right, that's for sure. I know that hon. Gentlemen opposite do not like this. I am filling in the gaps about what happened at their conference.

The report goes on: The conference draws the line at going on the box and saying that the Labour Government is all right. That is what the right hon. Member for Sidcup did at the conference. Therefore I thought I would have had special thanks from the hon. Member for Stratford-on-Avon for having filled in the gaps on these matters which he said he would deal with but which, unfortunately, he did not have time to cover.

I now come to the speech of the right hon. Gentleman—

Mr. James Prior (Lowestoft)

The right hon. Member should make his own speech.

Mr. Foot

One of the old-fashioned habits that we have on this side of the House is to answer the debate. I see that the right hon. Member for Lowestoft (Mr. Prior) is sitting on the Back Benches. Has he, too, been thrown out? Why does he not come and face the music? We had to listen to the right hon. and learned Member for Surrey, East at close quarters. So why does he not come and take his medicine?

Both the House and the country should study with the utmost care not only the speech of the right hon. and learned Member for Surrey, East but the addition to it—or the embroidery—by the hon. Member for Oswestry (Mr. Biffen). Both of them returned to a theme that was not elaborated in the previous Session of this Parliament, but which dominated the House during the early 1970s.

My right hon. Friend the Chancellor of the Exchequer said that the right hon. and learned Member for Surrey, East had not urged any return to the Industrial Relations Act 1971. I am not sure whether that was the case. Certainly from what I heard I thought that he was advocating a return to some form of legislation. The hon. Member for Oswestry was not advocating it in detailed form but he was suggesting that one of the main lines of activity that a Conservative Government would have to follow in some form or another was what he might describe as the reform of trade union law or the trade union situation.

The House and the country should have learned from what happened under the previous Conservative Governments. I should have thought that the right hon. and learned Member for Surrey, East was the last person to tell the House how these matters should be dealt with. I am certain that the right hon. Member for Lowestoft would much prefer his right hon. and learned Friend not to deal with these topics, because every time he returns to them he makes it much more difficult for a solution to be found.

The hon. Member for Oswestry put his finger on the truth to this extent. Of course we must debate these questions in the House. I fully agree that the trade union movement is not perfect and that there should be debates on these topics. However, anyone who studied the industrial history of this country over the past 10 or 25 years would begin to appreciate what enormous advances have been achieved by the trade union movement in terms of democracy, intelligent policy and active support for the welfare of the nation. It would be wrong of hon. Members to write that off—[Interruption.] Hon. Members may jeer. That is exactly the spirit that we had from them all through 1971, 1972 and 1973. Do they want to recreate all their follies?

The Conservatives should tell the country clearly, if they want that chapter properly and finally closed, that they will not attempt to return to any such legislative action. That does not mean that we cannot discuss the various aspects. There are many changes and reforms to be carried through in the trade union movement, and the movement will carry them through itself, as it has been willing to do over the past 10 or 20 years.

Anyone who thinks that there has not been great progress in the amalgamation of trade unions does not appreciate the problem. It is a most serious and difficult problem which can be solved only by persuasion and consent within the trade union movement. The same applies to a whole range of other policies. The only response given to most trade union leaders for what they have done in contributing to the welfare of the nation over this period is vilification in the Tory press and an echo of it here in the House of Commons. We heard echoes of it a few minutes ago. I hope, however, that all other hon. Members appreciate that if it had not been for the voluntary association and leadership of many of the heads of the trade union movement, backed by their members—they cannot achieve anything unless they have that backing—we should not have been able to make all these achievements.

Mr. Maude

What achievements?

Mr. Foot

Are Conservative Members interested in bringing down the rate of inflation or not? When I first went to the Department of Employment the rate was running at 15 per cent.—

Mrs. Kellett-Bowman

Who put it there?

Mr. Foot

The Conservative Government. The people who raised the inflation rate to its 1974 level were those who were responsible for the conduct of our affairs at that period. When I went to the Department there were forecasts for the year ahead of a rate of inflation of 17 per cent. or 18 per cent. by the autumn and of 20 per cent. to 22 per cent. by the following year. That is what was left for us by the Conservative Party and we had to fight and struggle to persuade people to bring it down.

I notice that the right hon. Lady the Leader of the Opposition does not say these things so raucously as do her right hon. and hon. Friends. Perhaps she understands that the people of this country are seriously interested in bringing down the inflation rate. They know that if we do not succeed in that task we shall not succeed in many of our other aims.

When I hear shouts on the lines of "What achievements have the Labour Government made?", I am minded to ask the right hon. Lady to consider the balance of payments. Is she interested in that aspect? [HON. MEMBERS: "What about our oil?"] Not only our oil should be taken into consideration. Half the record deficit in the balance of payments in 1974 was due to oil considerations and the other half to the incompetence of the Conservative Party. When we came into power in February 1974 not only were we left with a record inflation rate but we inherited a huge deficit on the balance of payments which we had to bring under control. Therefore, it must be said that those, too, are achievements. Furthermore, throughout this period we have laid the basis for advances in many other respects.

Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)

What would the figure have been this year if the balance of payments in respect of oil was the same this year as it was in 1974?

Mr. Foot

Of course the balance of payments on oil has made a considerable contribution, but when the Conservatives charge us with having made no achievement I ask them to examine the figures. They will see what a record deficit on the balance of payments was left to us by their Government. The fact that we had to deal with that record rate of inflation made it all the more difficult to deal with the world-wide problem of unemployment.

I fully acknowledge what was said by my hon. Friend the Member for South Ayrshire (Mr. Sillars) and I accept his criticisms and also his analysis of the wider problems. When we come back in the next Parliament, with the full majority which I am sure we shall all seek to secure, one of our major aims will be to ensure that we supply all our energies to dealing with unemployment. But, even in the circumstances of the last four years, we have taken a series of steps without which the unemployment figure would be higher. My hon. Friend knows that that is as much the case in Scotland as anywhere else.

At the same time we had to ensure that we held the United Kingdom together and carried through policies which were acceptable in the different parts of the United Kingdom. I do not know whether the right hon. Lady the Leader of the Opposition has learned at last that during this period this House had to take adventurous steps in an effort to hold the United Kingdom together. [HON. MEMBERS: "Oh."] It is all very well for Conservative Members to jeer. If the right hon. Lady had been in Berwick-upon-Tweed recently she would know that to be true.

Mrs. Margaret Thatcher (Finchley)

I went there.

Mr. Foot

I apologise to the right hon. Lady; she was in Berwick. I think that she has paid more visits to Scotland than has any Conservative Leader in modern times. Surely on some of those visits she would have learned that that is what the great majority of Scottish people want to secure.

My view is that in this House of Commons, limited, constrained and difficult though our position has been—and nobody knows better than I do how difficult it has been to get legislation through the House—we have been able to clear up part of the mess left to us by the Conservatives. At the same time we have been able to carry through major reforms and changes designed to hold the United Kingdom together and to enable us to overcome this problem in the future. We look forward with confidence to an election chosen at a date set by my right hon. Friend the Prime Minister rather than by Saatchi & Saatchi.

Question put, That the amendment be made:—

The House divided: Ayes 300, Noes 312.

Division No. 3]	AYES	10.0 p.m.
Adley, Robert	Fox, Marcus	Luce, Richard
Aitken, Jonathan	Fraser, Rt Hon H. (Stafford & St)	McAdden, Sir Stephen
Alison, Michael	Freud, Clement	MacCormick, Iain
Amery, Rt Hon Julian	Fry, Peter	McCrindle, Robert
Arnold, Tom	Galbraith, Hon T. G. D.	Macfarlane, Neil
Atkins, Rt Hon H. (Spelthorne)	Gardiner, George (Reigate)	MacGregor, John
Atkinson, David (B'mouth, East)	Gardner, Edward (S Fylde)	MacKay, Andrew (Stechford)
Awdry, Daniel	Gilmour, Rt Hon Sir Ian (Chesham)	Macmillan, Rt Hon M. (Farnham)
Bain, Mrs Margaret	Gilmour, Sir John (East Fife)	McNair-Wilson, M. (Newbury)
Baker, Kenneth	Glyn, Dr Alan	McNair-Wilson, P. (New Forest)
Banks, Robert	Godber, Rt Hon Joseph	Madel, David
Beith, A. J.	Goodhart, Philip	Marshall, Michael (Arundel)
Bell, Ronald	Goodhew, Victor	Marten, Neil
Bendall, Vivian	Goodlad, Alastair	Mates, Michael
Bennett, Sir Frederic (Torbay)	Gorst, John	Mather, Carol
Bennett, Dr Reginald (Fareham)	Gow, Ian (Eastbourne)	Maude, Angus
Benyon, W.	Gower, Sir Raymond (Barry)	Maudling, Rt Hon Reginald
Berry, Hon Anthony	Grant Anthony (Harrow C)	Mawby, Ray
Biffen, John	Gray, Hamish	Maxwell-Hyslop, Robin
Biggs-Davison, John	Grieve, Percy	Mayhew, Patrick
Blaker, Peter	Griffiths, Eldon	Meyer, Sir Anthony
Boscawen, Hon Robert	Grimond, Rt Hon J.	Miller, Hal (Bromsgrove)
Bottomley, Peter	Grist, Ian	Mills, Peter
Bowden, A. (Brighton, Kemptown)	Grylls, Michael	Miscampbell, Norman
Boyson, Dr Rhodes (Brent)	Hall-Davis, A. G. F.	Mitchell, David (Basingstoke)
Braine, Sir Bernard	Hamilton, Archibald (Epsom & Ewell)	Moate, Roger
Brittan, Leon	Hamilton, Michael (Salisbury)	Monro, Hector
Brocklebank-Fowler, C.	Hampson, Dr Keith	Montgomery, Fergus
Brooke, Hon Peter	Hannam, John	Moore, John (Croydon C)
Brotherton, Michael	Harrison, Col Sir Harwood (Eye)	More, Jasper (Ludlow)
Brown, Sir Edward (Bath)	Harvie Anderson, Rt Hon Miss	Morgan, Geraint
Bryan, Sir Paul	Haselhurst, Alan	Morgan-Giles, Roar-Admiral
Buchanan-Smith, Alick	Hastings, Stephen	Morris, Michael (Northampton S)
Buck, Antony	Havers, Rt Hon Sir Michael	Morrison, Rt Hon Charles (Devizes)
Budgen, Nick	Hawkins, Paul	Morrison, Hon Peter (Chester)
Bulmer, Esmond	Hayhoe, Barney	Mudd, David
Burden, F. A.	Heath, Rt Hon Edward	Neave, Airey
Butler, Adam (Bosworth)	Henderson, Douglas	Nelson, Anthony
Carlisle, Mark	Heseltine, Michael	Neubert, Michael
Chalker, Mrs Lynda	Hicks, Robert	Newton, Tony
Channon, Paul	Higgins, Terence L.	Normanton, Tom
Churchill, W. S.	Hodgson, Robin	Nott, John
Clark, Alan (Plymouth, Sutton)	Holland, Philip	Onslow, Cranley
Clark, William (Croydon S)	Hooson, Emlyn	Oppenheim, Mrs Sally
Clarke, Kenneth (Rushcliffe)	Hordern, Peter	Osborn, John
Clegg, Walter	Howe, Rt Hon Sir Geoffrey	Page, John (Harrow West)
Cockcroft, John	Howell, David (Guildford)	Page, Rt Hon R. Graham (Crosby)
Cooke, Robert (Bristol W)	Howell, Ralph (North Norfolk)	Page, Richard (Workington)
Cope, John	Hunt, David (Wirral)	Paisley, Rev Ian
Cormack, Patrick	Hunt, John (Ravensbourne)	Pardoe, John
Corrie, John	Hurd, Douglas	Parkinson, Cecil
Costain, A. P.	Hutchison, Michael Clark	Pattie, Geoffrey
Crawford, Douglas	Irving, Charles (Cheltenham)	Penhaligon, David
Critchley, Julian	James, David	Percival, Ian
Crouch, David	Jenkin, Rt Hon P. (Wanst'd&W'df'd)	Peyton, Rt Hon John
Crowder, F. P.	Jessel, Toby	Pink, R. Bonner
Dean, Paul (N Somerset)	Johnson Smith, G. (E Grinstead)	Prentice, Rt Hon Reg
Dodsworth, Geoffrey	Johnston, Russell (Inverness)	Price, David (Eastleigh)
Douglas-Hamilton, Lord James	Jones, Arthur (Daventry)	Prior, Rt Hon James
Drayson, Burnaby	Jopling, Michael	Pym, Rt Hon Francis
du Cann, Rt Hon Edward	Joseph, Rt Hon Sir Keith	Raison, Timothy
Durant, Tony	Kaberry, Sir Donald	Rathbone, Tim
Dykes, Hugh	Kellett-Bowman, Mrs Elaine	Rees, Peter (Dover & Deal)
Eden, Rt Hon Sir John	Kershaw, Anthony	Rees-Davies, W. R.
Edwards, Nicholas (Pembroke)	Kilfedder, James	Renton, Rt Hon Sir D. (Hunts)
Elliott, Sir William	Kimball, Marcus	Renton, Tim (Mid-Sussex)
Emery, Peter	King, Evelyn (South Dorset)	Rhodes James, R.
Ewing, Mrs. Winifred (Moray)	King, Tom (Bridgwater)	Rhys Williams, Sir Brandon
Eyre, Reginald	Kitson, Sir Timothy	Ridley, Hon Nicholas
Fairbairn, Nicholas	Knight, Mrs Jill	Ridsdale, Julian
Fairgrieve, Russell	Knox, David	Rifkind, Malcolm
Farr, John	Lamont, Norman	Rippon, Rt Hon Geoffrey
Fell, Anthony	Langford-Holt, Sir John	Roberts, Wyn (Conway)
Finsberg, Geoffrey	Latham, Michael (Melton)	Rodgers, Sir John (Sevenoaks)
Fisher, Sir Nigel	Lawrence, Ivan	Ross, Stephen (Isle of Wight)
Fletcher, Alex (Edinburgh N)	Lawson, Nigel	Rossi, Hugh (Hornsey)
Fletcher-Cooke, Charles	Lester, Jim (Beeston)	Rost, Peter (SE Derbyshire)
Fookes, Miss Janet	Lewis, Kenneth (Rutland)	Royle, Sir Anthony
Forman, Nigel	Lloyd, Ian	Sainsbury, Tim
Fowler, Norman (Sutton C'l'd)	Loveridge, John	St. John-Stevas, Norman
Scott, Nicholas	Steel, Rt Hon David	Wakeham, John
Scott-Hopkins, James	Steen, Anthony (Wavertree)	Walker, Rt Hon P. (Worcester)
Shaw, Giles (Pudsey)	Stewart, Rt Hon Donald	Walker-Smith, Rt Hon Sir Derek
Shaw, Michael (Scarborough)	Stewart, Ian (Hitchln)	Wall, Patrick
Shelton, William (Streatham)	Stokes, John	Walters, Dennis
Shepherd, Colin	Stradling Thomas, J.	Warren, Kenneth
Shersby, Michael	Tapsell, Peter	Weatherill, Bernard
Silvester, Fred	Taylor, R. (Croydon NW)	Wells, John
Sims, Roger	Taylor, Teddy (Cathcart)	Welsh, Andrew
Sinclair, Sir George	Tebbit, Norman	Whitelaw, Rt Hon William
Skeet, T. H. H.	Temple-Morris, Peter	Whitney, Raymond
Smith, Cyril (Rochdale)	Thatcher, Rt Hon Margaret	Wiggin, Jerry
Smith, Dudley (Warwick)	Thomas, Rt Hon P. (Hendon S)	Wilson, Gordon (Dundee E)
Smith, Timothy John (Ashfield)	Thompson, George	Winterton, Nicholas
Speed, Keith	Thorpe, Rt Hon Jeremy (N Devon)	Wood, Rt Hon Richard
Spence, John	Townsend, Cyril D.	Young, Sir G. (Ealing, Acton)
Spicer, Jim (W Dorset)	Trotter, Neville	Younger, Hon George
Spicer, Michael (S Worcester)	van Straubenzee, W. R.
Sproat, Iain	Vaughan, Dr Gerard	TELLERS FOR THE AYES:
Stainton, Keith	Viggers, Peter	Mr. Spencer Le Marchant and Mr. Michael Roberts.
Stanbrook, Ivor	Wainwright, Richard (Colne V)
Stanley, John
NOES
Abse, Leo	Davidson, Arthur	Hooley, Frank
Allaun, Frank	Davies, Bryan (Enfield N)	Horam, John
Anderson, Donald	Davies, Rt Hon Denzil	Howell, Rt Hon Denis (B'ham, Sm H)
Archer, Rt Hon Peter	Davies, Ifor (Gower)	Howells, Geraint (Cardigan)
Armstrong, Ernest	Davis, Clinton (Hackney C)	Hoyle, Doug (Nelson)
Ashley, Jack	Deakins, Eric	Huckfield, Les
Ashton, Joe	Dean, Joseph (Leeds West)	Hughes, Rt Hon C. (Anglesey)
Atkins, Ronald (Preston N)	de Freitas, Rt Hon Sir Geoffrey	Hughes, Mark (Durham)
Atkinson, Norman (H'gey, Tott'ham)	Dell, Rt Hon Edmund	Hughes, Robert (Aberdeen N)
Bagier, Gordon A. T.	Dempsey, James	Hughes, Roy (Newport)
Barnett, Guy (Greenwich)	Dewar, Donald	Hunter, Adam
Barnett, Rt Hon Joel (Heywood)	Doig, Peter	Irvine, Rt Hon Sir A. (Edge Hill)
Bates, Alf	Dormand, J. D.	Irving, Rt Hon S. (Dartford)
Bean, R. E.	Douglas-Mann, Bruce	Jackson, Colin (Brighouse)
Benn, Rt Hon Anthony Wedgwood	Duffy, A. E. P.	Jackson, Miss Margaret (Lincoln)
Bennett, Andrew (Stockport N)	Dunnet, Jack	Janner, Greville
Bidwell, Sydney	Dunwoody, Mrs Gwyneth	Jay, Rt Hon Douglas
Bishop, Rt Hon Edward	Eadie, Alex	Jeger, Mrs Lena
Blenkinsop, Arthur	Edge, Geoff	Jenkins, Hugh (Putney)
Boardman, H.	Edwards, Robert (Wolv SE)	John, Brynmor
Booth, Rt Hon Albert	Ellis, John (Brigg & Scun)	Johnson, James (Hull West)
Boothroyd, Miss Betty	Ellis, Tom (Wrexham)	Johnson, Walter (Derby S)
Bottomley, Rt Hon Arthur	English, Michael	Jones, Alec (Rhondda)
Boyden, James (Bish Auck)	Ennals, Rt Hon David	Jones, Barry (East Flint)
Bradley, Tom	Evans, Fred (Caerphilly)	Jones, Dan (Burnley)
Bray, Dr Jeremy	Evans, Gwynfor (Carmarthen)	Judd, Frank
Broughton, Sir Alfred	Evans, Ioan (Aberdare)	Kaufman, Rt Hon Gerald
Brown, Hugh D. (Provan)	Evans, John (Newton)	Kelley, Richard
Brown, Robert C. (Newcastle W)	Ewing, Harry (Stirling)	Kerr, Russell
Brown, Ronald (Hackney S)	Faulds, Andrew	Kilroy-Silk, Robert
Buchan, Norman	Fernyhough, Rt Hon E.	Kinnock, Neil
Buchanan, Richard	Fitch, Alan (Wigan)	Lambie, David
Butler, Adam (Bosworth)	Flannery, Martin	Lamborn, Harry
Callaghan, Rt Hon J. (Cardiff SE)	Fletcher, L. R. (Ilkeston)	Lamond, James
Callaghan, Jim (Middleton & P)	Fletcher, Ted (Darlington)	Latham, Arthur (Paddington)
Campbell, Ian	Foot, Rt Hon Michael	Leadbitter, Ted
Canavan, Dennis	Ford, Ben	Lee, John
Cant, R. B.	Forrester, John	Lestor, Miss Joan (Eton & Slough)
Carmichael, Neil	Fowler, Gerald (The Wrekin)	Lever, Rt Hon Harold
Carter, Ray	Fraser, John (Lambeth, N'w'd)	Lewis, Arthur (Newham N)
Carter-Jones, Lewis	Freeson, Rt Hon Reginald	Lewis, Ron (Carlisle)
Cartwright, John	Garrett, John (Norwich S)	Litterick, Tom
Castle, Rt Hon Barbara	Garrett, W. E. (Wallsend)	Lofthouse, Geoffrey
Clemitson, Ivor	George Bruce	Lomas, Kenneth
Cocks, Rt Hon Michael (Bristol S)	Gilbert, Rt Hon Dr John	Loyden, Eddie
Cohen, Stanley	Ginsburg, David	Luard, Evan
Colquhoun, Ms Maureen	Golding, John	Lyon, Alexander (York)
Concannon, Rt Hon John	Gould, Bryan	Lyons, Edward (Bradford W)
Conlan, Bernard	Gourlay, Harry	Mabon, Rt Hon Dr J. Dickson
Cook, Robin F. (Edin C)	Graham, Ted	McCartney, Hugh
Corbett, Robin	Grant, George (Morpeth)	McDonald, Dr Oonagh
Cowans, Harry	Grant, John (Islington C)	McElhone, Frank
Cox, Thomas (Tooting)	Grocott, Bruce	MacFarquhar, Roderick
Craigen, Jim (Maryhill)	Hamilton, W. W. (Central Fife)	McGuire, Michael (Ince)
Crawshaw, Richard	Hardy, Peter	McKay, Alan (Penistone)
Cronin, John	Harrison, Rt Hon Walter	MacKenzie, Rt Hon Gregor
Crowther, Stan (Rotherham)	Hart, Rt Hon Judith	Maclennan, Robert
Cryer, Bob	Hattersley, Rt Hon Roy	McMillan, Tom (Glasgow C)
Cunningham, G. (Islington S)	Hayman, Mrs Helene	McNamara, Kevin
Cunningham, Dr J. (Whiteh)	Healey, Rt Hon Denis	Madden, Max
Dalyell, Tam	Heffer, Eric S.	Magee, Bryan

Mahon, Simon	Rees, Rt Hon Merlyn (Leeds S)	Thomas, Dafydd (Merioneth)
Mallalieu, J. P. W.	Reid, George	Thomas, Jeffrey (Abertillery)
Marks, Kenneth	Richardson, Miss Jo	Thomas, Mike (Newcastle E)
Marshall, Dr Edmund (Goole)	Roberts, Albert (Normanton)	Thomas, Ron (Bristol NW)
Marshall, Jim (Leicester S)	Roberts, Gwilym (Canunock)	Thorne, Stan (Preston South)
Mason, Rt Hon Roy	Robertson, George (Hamilton)	Tierney, Sydney
Maynard. Miss Joan	Robertson, John (Paisley)	Tilley, John
Meacher, Michael	Robertson, Home	Tinn, James
Mellish, Rt Hon Robert	Robinson, Geoffrey	Tomlinson, John
Mikardo, Ian	Roderick, Caerwyn	Tornney, Frank
Millan, Rt Hon Bruce	Rodgers, George (Chorley)	Torney, Tom
Miller, Dr M. S. (E Kilbride)	Rodgers, Rt Hon William (Stockton)	Tuck, Raphael
Mitchell, Austin (Grimsby)	Rooker, J. W.	Urwin, T. W.
Mitchell, R. C. (Soton, Itchen)	Roper, John	Varley, Rt Hon Eric G.
Molloy, William	Rose, Paul B.	Wainwright, Edwin (Dearne V)
Moonman, Eric	Ross, Rt Hon W. (Kilmarnock)	Walker, Harold (Doncaster)
Morris, Alfred (Wythenshawe)	Rowlands, Ted	Walker, Terry (Kingswood)
Morris, Rt Hon Charles R.	Ryman, John	Ward, Michael
Morris, Rt Hon J. (Aberavon)	Sandelson, Neville	Watkins, David
Morton, George	Sedgemore, Brian	Watkinson, John
Moyle, Rt Hon Roland	Selby, Harry	Weetch, Ken
Mulley, Rt Hon Frederick	Sever, John	Weitzman, David
Murray, Rt Hon Ronald King	Shaw, Arnold (Ilford South)	Wellbeloved, James
Newens, Stanley	Sheldon, Rt Hon Robert	White, Frank R. (Bury)
Noble, Mike	Shore, Rt Hon Peter	White, James (Pollok)
Oakes, Gordon	Short, Mrs Renée (Wolv NE)	Whitehead, Philip
Ogden, Eric	Silkin, Rt Hon John (Deptford)	Whitlock, William
O'Halloran, Michael	Silkin, Rt Hon S. C. (Dulwich)	Wigley, Dafydd
Orbach, Maurice	Sillars, James	Willey, Rt Hon Frederick
Orme, Rt Hon Stanley	Silverman, Julius	Williams, Rt Hon Allan (Swansea W)
Ovenden, John	Skinner, Dennis	Williams, Alan Lee (Hornch'ch)
Owen, Rt Hon Dr David	Smith, Rt Hon John (N Lanarkshire)	Williams, Rt Hon Shirley (Hertford)
Padley, Walter	Snape, Peter	Williams, Sir Thomas (Warrington)
Palmer, Arthur	Spearing, Nigel	Wilson, Rt Hon Sir Harold (Huyton)
Park, George	Sprigs, Leslie	Wilson, William (Coventry SE)
Parker, John	Stallard, A. W.	Wise, Mrs Audrey
Parry, Robert	Stewart, Rt Hon M. (Fulham)	Woodall, Alec
Pavitt, Laurie	Stoddart, David	Woof, Robert
Pendry, Tom	Stott, Roger	Wrigglesworth, Ian
Perry, Ernest	Strang, Gavin	Young, David (Bolton E)
Phipps, Dr Colin	Strauss, Rt Hon G. R.
Prescott, John	Summerskill, Hon Dr Shirley	TELLERS FOR THE NOES:
Price, C. (Lewisham W)	Swain, Thomas	Mr. James Hamilton and Mr. Donald Coleman.
Price, Willam (Rugby)	Taylor, Mrs Ann (Bolton W)
Radice, Giles

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That an humble Address be presented to Her Majesty, as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of Her Majesty's Household.